NOTE! This site uses cookies and similar technologies.

If you not change browser settings, you agree to it. Learn more

I understood

Understanding how and why we use cookies

We use cookies on our website (firstconinvest.com) to create the most effective website possible for our users. Among other things, the cookies we use allow us to improve your experience when using our website and to ensure the website performs as you expect it to.

This Cookie Policy explains what cookies are, how we use them on Firstconinvest.com and what benefits they bring.

On local websites which are linked from this site, cookies may be used to allow you to log on to your hedge fund account, choose log-in preferences, and apply for products and services online and use financial tools. Please bear in mind that Firstconinvest Group members will have their own privacy and cookie policies that will govern their use of cookies on local sites and any information you submit on a local site. Please read carefully any local site and/or product terms and conditions before using the local site or product.

As you may be aware, recent legislation requires websites to gain visitors' consent to use certain cookies. As a group, Firstconinvest is working to implement appropriate changes to its websites as soon as possible.

  • This email address is being protected from spambots. You need JavaScript enabled to view it.

In April, 2012, President Barack Obama signed into law the Jumpstart Our Business Startups (JOBS) Act, which makes it far easier for companies to market their securities to investors.

Next month, rules mandated by the JOBS Act and adopted in July by the Securities and Exchange Commission will go into effect that loosen the decades-old prohibitions on general solicitation efforts such as cold calling, mass mailing, and running certain commercials. The rules won’t only apply to, say, start-up tech companies. They'll also apply to hedge funds, private-equity funds, and other alternative investment funds.

Will we soon see full-page advertisements for hedge funds in the Times, GQ, or Sports Illustrated? Maybe there will be smiling children and a line like “Invest in Cerberus: Your Future and Your Family.” Will they run commercials during the Super Bowl or the Sunday-morning talk shows? What about mass mailings to everyone in the tri-state area who bought a Mercedes-Benz or a Rolex last year? It’s all possible now.

The JOBS Act is based on the idea that the government should make it easier for companies to go public. And loosening the restrictions on private fundraising could make the I.P.O. process easier, which could lead to more I.P.O.s, which could lead to growth. To do this, however, the legislation had to reverse decades of precedent in which anyone approaching prospective investors in connection with privately-placed securities had to already have a relationship with them. Investors couldn't sell securities privately, for instance, if they published advertisements in a magazine. Starting next month, private companies will be able to advertise as much as they want, as long as those who eventually invest qualify as “accredited investors”—people who earn more than two hundred thousand dollars per year or have more than a million dollars in net worth, excluding their family home. The law was drafted so broadly that it applies not only to start-ups and other operating businesses but also to other securities issuers, such as hedge funds and private-equity funds.

Given that the adoption of the JOBS Act overlapped with the anti-hedge-fund rhetoric of the 2012 Presidential campaigns, during which Obama compared executives at Bain Capital to vampires, critics might be suspicious of his Administration’s inclusion of hedge funds and private-equity firms in the advertising liberalization. Obama enjoyed strong support from hedge funds and private-equity funds in 2008, followed by a sharp decline in support in 2012. By allowing these funds to participate in the advertising free-for-all during the middle of the campaign, was Obama attempting to quietly win back their affections?

Perhaps. But there are also policy reasons for removing the advertising limitations for hedge funds and private-equity funds. Hedge funds provide much needed liquidity to financial markets by actively buying and selling stocks and bonds, which gives would-be investors confidence that, when they eventually want to liquidate a holding, the prices and volumes in the market will permit them to do so. Without that confidence, many investors would be reluctant to participate in I.P.O.s, for example. Meanwhile, private-equity funds save faltering companies that might otherwise go bankrupt, frequently by taking a public company private and, after restructuring and reorganizing it, returning it to public ownership through an I.P.O.

Also, by allowing hedge funds and private-equity funds to benefit from the JOBS Act’s advertising provisions, the government will allow the funds to provide more information to would-be investors. These funds are often described as shadowy and secretive partly because of the ban on advertising, which prevented them from openly discussing their investment activities with the media and the public. Lawyers for these funds historically advised their clients that any decision to speak with journalists or publish information about their activities could be misconstrued by the S.E.C. and the courts as an illegal “general solicitation” for their funds.

By including hedge funds and private-equity funds as beneficiaries of the JOBS Act, Obama has signalled that you have less to fear from a vampire if you can actually see him.

Stock Data

An error occured during parsing XML data. Please try again.

Hot Articles

Why Choose Hedge Funds ...
There are a variety of reasons to include hedge funds in a ...
Read more
Alternative investments ...
According to the financial market, more financial advisors ...
Read more
About real estate hedge ...
real estate hedge funds
Real estate hedge funds enjoy the unique freedom of ...
Read more
Apply here for your free Firstconinvest hedge fund account!