Wants Greater Disclosure & Transparency

A bill was recently introduced into the Connecticut General Assembly which would require investment advisers to hedge funds to provide an overview of any conflicts of interests of such investment adviser with respect to its duties to the fund (or its investors).  This new bill comes about a year after another bill was proposed (but not passed) in Connecticut (see New Connecticut Hedge Fund Laws Proposed).

The text of bill is below and can also be found here.

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General Assembly

Raised Bill No. 5053

February Session, 2010

LCO No. 540

*00540_______BA_*

Referred to Committee on Banks

Introduced by: (BA)

AN ACT CONCERNING TRANSPARENCY AND DISCLOSURE.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2010) (a) As used in this section, “hedge fund” means any investment company, as defined in Section 3(a)(1) of the Investment Company Act of 1940, located in this state (1) that claims an exemption under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940; (2) whose offering of securities is exempt under the private offering safe harbor criteria in Rule 506 of Regulation D of the Securities Act; and (3) that meets any other criteria as may be established by the Banking Commissioner in regulations adopted under subsection (c) of this section. A hedge fund is located in this state if such fund has an office in this state where employees regularly conduct business on behalf of the hedge fund.

(b) Any investment adviser to a hedge fund shall disclose to each investor or prospective investor in such hedge fund, not later than thirty days before any such investment, any financial or other interests the investment adviser may have that conflict with or are likely to impair the investment adviser’s duties and responsibilities to the fund or its investors.

(c) The Banking Commissioner may adopt regulations, in accordance with chapter 54 of the general statutes, to implement the provisions of this section.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2010

New section

Statement of Purpose:

To ensure transparency by requiring investment advisers to a hedge fund to disclose any potential conflicts of interest or interests that are likely to impair the investment adviser’s duties and responsibilities to the fund or its investors.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]

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Other related hedge fund law blog posts include:

• State Hedge Fund Laws
• Hedge Fund Attorney
• How to register as an Investment Advisor
• Overview of the Series 65 exam

Bart Mallon, Esq. runs the Hedge Fund Law Blog and provides hedge fund information and manager registration services through Cole-Frieman & Mallon LLP. He can be reached directly at 415-868-5345.