July 29, 2013
I do not believe this rule has been thoroughly reviewed for its consequences. Allowing any form of advertisement for hedge funds is contrary to the investment vehicles purpose. Lest we not forget , hedge funds are NOT for mom and pops but for accredited investors. Accredited investors surely have the resources via their brokers, financial advisors, accountants, bankers , etc to access hedge fund investments.I doubt they would make an investment due to a commercial they saw on televison or off a billboard on a side of a bus. Does the SEC truly believe the mom and pop investor truly will be able to recognize the intrinsic risk of hedge funds?
It is ironic the SEC has promoted risks on daytrading,options and futures trading, penny stock trading yet will allow main street investors to participate in hedge fund investing with less information on its inherent risks.
The second issue is the "bad boy rule". It is unfair as individuals may be subjected to suspensions due to the many factors, such as guilt by associations, settlements to avoid a legal fight against a regulator such as CFTC and FINRA. As the SEC is fully aware, the initial determination of punishment in the FINRA rule book is wide. Two different people may receive different punishments for the same exact act. FINRA also utilizes broad and overeaching rules such as "fair and equitable trade" as a catch all to guarantee a fine, and/or suspension and/or disbarrment. This country's court systmen has different sentencing guidelines based on the specific nature of the crime itself. NOT FINRA. The belief that FINRA promotes a fair and equitable procedure for appeals is also farce. In an appeals process, FINRA arbitrator is asked rule against another body of FINRA-we can only conclude as a matter on human nature and reality, FINRA does not rule against itself often , if at all. The SEC should implement a bad boy rule, it should be on individuals who have committed serious offenses. One would believe the SEC and other regulators would bar any individuals who pose a great threat to the investing public and these individuals should be barred. However, given the large swath of reasons as to why indivudasl may be temporary suspended, to include suspensions as a permament block is extreme , unfair and unamerican. Suspended individuals must be afforded the opportunity to have their case reviewed individually instead of the "herd mentality" the proposed rule has. Does the SEC believe that every indivual who is suspended is exactly in the situation? If our court system and the founders of our country took that approach, there would be no appeals court. In fact, I would go as far as to say no other industry or business imposes such draconian measures.