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In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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July 31, 2003

The Overblown' Hedge Fund Fraud Cases

By Gregory Bresiger

The Securities Industry Association, in a recent comment letter to the Securities and Exchange Commission, is arguing against drastic new rules changes for hedge funds.

That's because, the SIA held, these popular and controversial investments are not a problem area.

In its letter, the SIA said one of its recent panels, which was attended by officials of the Securities and Exchange Commission, found few problems in the hedge fund business.

"A notion embedded in many recent press accounts that the industry has been characterized by frequent instances of fraud was convincingly refuted at the roundtable," according to the letter.

"Commission staff members at the roundtable acknowledged the existence of some 6,000 hedge funds, but cited only 12 enforcement actions over the past year that appear to involve hedge funds," the letter continued. Commodity Futures Trading Commission General Counsel Patrick McCarthy also said that his group has found only a small number of hedge fund violations.

The Public

SIA officials are trying to short circuit calls that would add more rules and regulations to the manner in which these funds can be offered to the public.

However, the SIA would support the loosening of some of these restrictions at the same time it would accept the tightening of the accredited investor standard, the letter said.