INTERNATIONAL: IOSCO publish final report on hedge funds

Thursday November 30 2006

IOSCO has published its final report on hedge funds. This can be found at the above link.

In brief, there are four significant conclusions to be drawn from these responses:

*None of the responding members has adopted a formal, legal definition of the term “hedge fund.” A chart summarizing survey responses relating to how members define or identify hedge funds is attached as Appendix D.

*Hedge fund advisersare regulated in most of the responding jurisdictions.

*Few jurisdictions report any significant “retailization” of hedge funds at this point in time, but some regulators anticipate that this is changing or may change in the future.

*There have been some incidents of fraud relating to hedge funds in the responding jurisdictions, with the extent of fraud low in some jurisdictions but varying in member jurisdictions. In addition, some members noted that their regulatory regime for hedge funds was new and that as a result, there was no data on hedge fund fraud. Member jurisdictions continue to monitor for fraud in connection with hedge funds.

The report notes that there have been developments of interest in terms of how hedge funds are regulated in many jurisdictions since the publication of the 2003 TC Report. The way that member jurisdictions are regulating hedge funds differ and many jurisdictions are still developing their regulations. In most of the responding member jurisdictions, hedge fund advisers are, or soon will be, regulated. Some member jurisdictions prefer to regulate the adviser to the hedge fund, rather than the fund itself. Many member jurisdictions regulate both the hedge fund adviser and the hedge fund. Various member jurisdictions regulate the distribution of hedge funds, and/or the information that the hedge funds provide to customers, and/or information provided to regulators regarding fund finances.