Hedge funds have been measured in their adoption of social media. This may be attributed to an ingrained culture of “secrecy” brought about by government regulation that imposed a ban on general solicitation for almost eighty years. This ban was lifted by passage the JOBS Act more than three years ago and hedge funds are bringing themselves up to speed in terms of their social media presence.
Social Media Is a Two-Way Street
Hedge fund use of social media has unquestionably been on the rise and this benefits not only hedge funds but also investors. Hedge funds are using social media, such as LinkedIn, Facebook and Twitter to augment marketing strategy, identify potential investors and raise their public profile.
Investors have also benefited from this novel transparency by using social media to conduct their own due diligence on the hedge funds.
In short, social media has been a positive force for hedge funds and their potential investors.
Enter the SEC
Suffering from its own lengthy history of keeping a boot on the neck of hedge funds, the Security and Exchange Commission (SEC) has proposed new rules which will require hedge funds to provide greater disclosure regarding their use of social media platforms.
To be fair, the SEC has required similar disclosures from hedge funds with regard to websites for most of the Internet Age. Also in the interests of fairness, it must be noted that as a result of these required disclosures, the web pages of the majority of hedge funds, offer little more in the way of information than one might expect to find on a business card. Hedge funds, faced with potential fines and sanctions, chose the safest path, which rendered these websites all but useless to investors.
Marginalizing the ability of investors to perform their due diligence might well be the unintended consequence of the SEC’s foray into increased regulation of hedge funds with regard to social media platforms.
The SEC has said that these regulations would be “useful” to the general public and that the information gathered under the proposed regulations could help the SEC “prepare for examinations.”
These statements strain credulity. Frankly speaking, only a small percentage of the general public can meet accredited investor guidelines. The accredited investor guidelines represent a sufficient safeguard for all the concerns the SEC has expressed with regard to investors and social media.
Further regulation will only reduce transparency, as the regulation imposed on hedge fund websites has already demonstrated.
The SEC’s proposals were published for public comment on May 20 and comments will be accepted thru mid-July. If you have a position to articulate, time is short.
Hedge Fund Jobs
Any new regulation of the industry can impact jobs, either positively or negatively. Social media managers may find a field fertile with opportunity in the hedge fund industry. Additionally, new regulatory initiatives renew awareness regarding the importance of maintaining excellent compliance protocols. It follows that those with social media expertise and those with compliance experience may see an upturn in hedge fund employment opportunities.