Hedge funds have long been dampened by the perpetual rain cloud of suspicion looming overhead, but several in the industry see regulators' proposals last week requiring advisors to register as investment advisors with the Securities and Exchange Commission as a welcome ray of sunshine. Some even likened the proposals to a symbolic "Good Housekeeping Seal of Approval."
Hedge fund managers knew increased oversight was on the horizon. It was just a matter of when it would take place. While that time isn't quite here yet, the SEC took a first step in that process last week by laying groundwork that would permit it to regularly inspect hedge funds. The SEC said it was particularly interested in regular exams that would allow it to detect, in the early stages, problems that have led to well-publicized blow-ups in the past. It could help to deter fraud and would "encourage a culture of compliance and controls," the SEC said.