June 14, 2011
June 14th, 2011
Subject: Public Notice 2011-109
I currently run a small hedge fund and the proposed net worth rule changes would severely hurt my small business. I ask the commission to please consider the following:
First, please do not exclude the value of an investors primary residence in the net worth calculation as this is not required by the Dodd-Frank Act. Also this unfairly targets one set of investors (home owners) versus another (renters) and is clearly not fair. Also, an investor's sophistication should not be determined by whether they chose to own a home or whether they chose to have a mortgage versus paying cash for their home. The net worth calculation should be an unbiased measure of an individual's net worth. Please do not exclude the value of one's primary residence from the new net worth calculation.
Second, please do not raise the value of the net worth calculation so dramatically all at one time. Raising it from $1.5M to $2.0M in one big step function will hurt many small hedge funds like mine. Instead, please slowly implement this change over time. For example you could raise the net worth requirement amount by 5% a year for the next 10 years to slowly ratchet it up over time and still be in compliance with the new Dodd-Frank Act. By raising the threshold more evenly and slowly, this would give small businesses like my hedge fund time to react, adjust and not go out of business. I don't think the Dodd-Frank Act intended a dramatic quick change that would hurt small businesses. Instead I think the amount should very slowly be adjusted for inflation over time giving small hedge funds time to react and adjust over time.
Finally, if possible please allow a "grand-father" exception for investors already invested in a hedge fund. My existing investors would be very upset if I am forced to kick them out of my hedge fund because of a dramatic and quick rule change. Instead, please allow those who have already invested to remain invested.
Thank you for considering my comments.
Please feel free to contact me if you have any questions or want me to further explain my views to the committee.
Thornton Capital Management, LLC