Investors may soon get a keyhole view into the cloistered world of hedge funds and private equity firms, thanks to a little-known provision in a new bill that would relax rules on how investment firms can market themselves to the public.
The bill, called the Jump-start Our Business Start-ups Act, or JOBS Act , would reverse parts of a nearly 80-year-old regulation preventing these funds from discussing even the most basic items, like performance or investment strategy, with outsiders. The rule, part of the Securities Act of 1933, gave an already secretive industry the regulatory cover to remain silent.
“It’s a dramatic change from where the industry is,” said Tripp Kyle, a partner at the public relations firm Brunswick Group, which works with some of the largest investment firms in the world. “I think it presents a real opportunity for firms to evolve their mind-set from what they can’t do to what they can and perhaps should be doing.”
The bipartisan bill, which President Obama is expected to sign next month, enables hedge funds and private equity firms to solicit investors directly, instead of through third parties, which typically vet the firms before introducing them to clients. While the bill could ease the path to fund-raising, it could also introduce new risks to small investors unaccustomed to the complex and risky strategies the firms deploy.Page 1 of 4 | Next Page