Subject: File No. S7-07-12
From: Daniel P Smith
Affiliation: None

August 30, 2012

Hedge funds should not be allowed to advertise, unless hedge funds are held to the same disclosure requirements and investment regulations as mutual funds.

Allowing hedge funds to advertise will put investments bound by the Investment Company Act of 1940--mutual funds ant ETFs--at a disadvantage relative to investments that are not. How can someone who has to publish every detail of their holdings compete with someone who's allowed to advertise what is almost "an undertaking of great advantage, but nobody to know what it is?"

Deprived of most information except past performance, many investors are certain to base their decision on past performance. They will not be able to evaluate the risk, compare the hedge fund to an appropriate benchmark, or use the tools that services like Morningstar provide for mutual funds and ETFs.

It is a either a fantasy, or a cynical imposture, to say that hedge funds will be advertised to everyone, yet purchased only by qualified purchasers.

Allowing hedge funds to advertise is sure to encourage investment by investors that neither appreciate their risk and nor have the resources to tolerate severe losses. Salespeople will encourage clients to fib on their forms. It will produce a crop of victims. Blaming the victims after the fact will not undo the damage.