The credit market implosion and the Bernie Madoff scandal of last year changed the regulatory landscape as industry players acknowledged that a higher degree of regulation was on the way.
The Managed Funds Association understood this when they came to Chicago for their annual forum in June. However, MFA President and CEO Richard Baker wanted to make sure that commodity trading advisors who face registration under the Commodity Futures Trading Commission (CFTC) are not forced to face dual registration under the Securities and Exchange Commission (SEC).
The MFA did not get all that they wanted from the Administration’s proposed legislation, the Private Fund Investment Advisers Registration Act of 2009, announced in July but it could have been worse.
David Matteson, partner with Drinker Biddle, says any CTA trading strictly futures would not need to register but advisors involved in both futures and securities would need to register and those only marginally involved in securities also may have to register.
MFA General Counsel Stuart Kaswell says, “we are in favor of the major thrust of the Administration’s proposed legislation.” Kaswell noted that “MFA supports changes to Section 203(b)(3) of the Investment Advisers Act, which would eliminate the private advisors exemption.” The effect of the change would be to require an advisor to a hedge fund to be registered under the Advisers Act.
Where MFA takes issue is that the proposal also effectively would take away the 203(b)(6) exemption under the Act. That change would require CTAs that may only marginally use securities to register with the SEC. “MFA believes that CTAs that are not primarily acting as investment advisors should not be subject to dual registration,” Kaswell says. He adds, “we want to continue to work with the Administration and policymakers on this and related issues.”
The proposal requires all investment advisors with more than $30 million under management to register.