For more than a year, Wall Street watchers have been hyping the JOBS (Jumpstart Our Business Startups) Act as a significant piece of legislation. Many experts said that it could lead to new firms in the financial sector. Others anticipated a transformation within the hedge fund industry. Some believed that it would foster the creation of new jobs.
Ron Geffner, a partner at New York-based law firm Sadis & Goldberg, feels that it may be too soon to make any predictions. “It’s premature to determine the usefulness of the legislation,” Geffner , whose law firm represents more than 600 hedge fund managers worldwide.
While many JOBS Act supporters expect small- and medium-sized firms to take advantage of the option to advertise, Geffner thinks that the law may cater to “outlier” firms. “Outlier firms, that doesn’t mean good or bad,” said Geffner. “It means those firms that are large enough, who have big enough budgets to make practical use of it.”
Geffner said that while hedge fund managers are happy that the law is in place, they may not feel the need to advertise. “I would imagine a super majority of fund managers currently will not make use of it,” he said. “I anticipate that unless you have a budget, it may not be as practical to make use of it.”
Instead, most mangers will keep an eye on what others are doing. If it works for them, managers who were on the fence may be more interested in launching a proper marketing campaign. Those who do wish to advertise may be halted by other regulations.
“There are rules in place from other bodies of law that [may] preclude you from engaging in an advertisement,” said Geffner. “Under the Commodity Exchange Act there are limitations on making use of advertisements. You either have to modify your marketing strategy or wait for laws to come into parity.”
Geffner said that he is surprised that the Commodity Futures Trading Commission has not “conformed the Commodity Exchange Act to allow” for parity. “My understanding is that it is the United States of America — not the My State versus Your State of America,” Geffner, who also serves as the Vice President of the Hedge Fund Association, joked.