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U.S. markets recover from steep losses
WASHINGTON, July 11 (UPI) -- U.S. regulators Wednesday agreed to adopt a new antifraud rule aimed at money managers who mislead or defraud investors, including those in hedge funds.
The rule, which takes effect 30 days after publication in the U.S. Federal Register, clarifies the Securities and Exchange Commission's ability to punish managers who defraud investors in pooled investment vehicles, including hedge funds, The Wall Street Journal reported.
It applies to managers' activities such providing false account statements and issuing misleading reports to investors, and relies on the SEC's broad authority to combat fraud by investment advisers, regulators said.
The rule -- which SEC Chairman Christopher Cox called "an important tool to help police this market" -- was prompted by an appellate court ruling last year that rejected an earlier SEC rule tightening hedge-fund manager oversight.
The court also said a hedge-fund manager's client was the fund itself, not investors in it.
Regulators feared the ruling would hurt the SEC's ability to protect investors defrauded by hedge-fund managers, the Journal reported.
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