SEC Director Norm Champ Statement on Various Issues, Particularly JOBS Act Amendments (with Lofchie Comment)

Norm Champ, Director of the SEC Division of Investment Management, spoke at the PLI Hedge Fund Management Conference to discuss important issues regarding hedge fund managers, with a focus on the recent JOBS Act rulemaking. Mr. Champ highlighted the opportunity given to investment advisers by the JOBS Act to reach a much wider audience in the distribution of shares of private funds, but noted the new regulatory burdens and additional regulatory focus on private funds. In particular, he cautioned fund managers to be particularly mindful of the content of their promotional materials, since those materials are distributed to a wider audience of investors, as well as to comply with the other provisions of the JOBS Act; e.g., the restrictions on the involvement of bad actors. In this regard, he specifically asked for comments on a number of topics, including whether the SEC should issue more detailed rules on topics such as performance reporting.

Mr. Champ closed by touching briefly on a number of topics, including the value of the information that the SEC had received on Form PF and the importance of funds' having proper compliance procedures - particularly with respect to the prevention of insider trading.

Lofchie Comment:On the JOBS Act front, the message from the SEC is (pretty reasonably): there are new rules and compliance with the requirements of those new rules is going to get significant attention. Accordingly, it behooves funds that are going to engage in general solicitation, general advertising, as permitted by the JOBS Act, to (i) step up the review of their advertising materials, (ii) collect all of their "bad actor" information and (iii) review their procedures for determining the status of accredited investors.As far as Form PF is concerned, there is likely some value to the regulators in it, but there would be far more value if the questions in the Form were substantially revised: the financing questions asked in the Form are confusing and may not produce anything other than largely meaningless results. Given the amount of money that the funds industry must spend answering Form PF questions, it is incumbent on the regulators to rewrite the questions so that they are asking for information that would be of greater value to the government.

See: Text of Director Norm Champ's Speech.See generally: SEC Amends Private Placement Rules.