MFA Blog

Liquid Alternatives Face New Regulatory Scrutiny

Posted on June 25, 2014

Liquid alternatives, a fast growing industry, are seeing stepped up regulatory scrutiny this summer.  Regulators plan “to zero in on both the marketing of the funds and the investment strategies they employ,” reported Investment News.

The publication noted that the Securities and Exchange Commission (SEC) plans to conduct “sweep” exams this summer on 25 firms managing liquid alternatives funds.  That represents about 14% of the 185 funds in the liquid alts space.

“It seems to me that this is something where the SEC is going in purely as a sort of advance strike-force,” Norman E. Mains, managing director for Forward Management, told Investment News.

Aside from marketing and investment strategies, it was reported that the SEC announced plans to evaluate funds’ leverage, liquidity, and valuation, in addition to the strength of their oversight boards and compliance staff.  A recent PricewaterhouseCoopers report noted that the SEC is moving from reactionary regulation to “proactive oversight” of the liquid alts space.

Read more about liquid alternatives and the regulatory oversight that they face online from Investment News.