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SEC proposes that ban on advertising by hedge funds be eased

By Andrew Tangel, Los Angeles Times –

Don’t look for them on bus benches or in the Yellow Pages, but hedge funds soon could be running ads.

For more than 30 years, hedge funds and other private investment vehicles have been barred from marketing to the public. Regulators feared that breathless advertising campaigns would lure unsophisticated investors who didn’t understand the risks.

The Securities and Exchange Commission proposed Wednesday that the ban be eased.

The commission voted to relax the restrictions to comply with this year’s Jumpstart Our Business Startups Act, which sought to make it easier for investment firms to raise money from prospective clients.

Under the SEC proposal, those who take part in such private offerings still would need to be so-called accredited investors. Such investors must meet certain income or net worth requirements.

Private offerings raised more than $1 trillion in 2011, about as much through offerings registered with the SEC, Chairman Mary L. Schapiro said.

“The proposed rules fulfill Congress’ clear directive that issuers be given the ability to communicate freely to attract the capital they need, while obligating them to take steps to ensure that this ability is not used to sell securities to those who are not qualified to participate in such offerings,” Schapiro said at a meeting Wednesday.

The SEC will accept comments for 30 days before a final vote on the rule change.

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