CT considering hedge fund bill

Some Connecticut lawmakers are resurrecting efforts to pass new state regulations on the hedge fund industry, frustrated by what they see as inaction in Washington.

The legislature's Banks Committee has scheduled a public hearing for Thursday on the latest version of the hedge fund legislation.

Sen. Robert Duff, D-Norwalk, co-chairman of the General Assembly's Banks Committee, says last year's failed bill that required hedge funds and private equity funds to disclose conflicts of interest between an investor and a fund manager, will be "a starting point" for new legislation this year aimed at making the industry more transparent for investors.

"I've had a lot of people inside the industry tell me that I was right on with this bill," Duff said. "Even in their opinion, we could go further."

The bill passed the Senate on a 24-12 party-line vote, but died in the House of Representatives because of inaction.

Opponents said they worried the legislation could become a burden for the hedge fund industry in Connecticut, one of the top locations in the country for these private partnerships that are typically open to a limited number of investors and require a large initial minimum investment. The state is home to about 200 hedge funds.

Last year, Attorney General Richard Blumenthal testified that wealthy and sophisticated investors were no longer the only people with a stake in hedge funds because pensions, charitable endowments and school endowments invest in them.

While Blumenthal acknowledged federal reforms were preferable, he testified about "a regulatory black hole" and said "states must act."

John Burnjes, a partner with Bracewell & Giuliani LLP, an international law firm with offices in Hartford, and a member of the Connecticut Hedge Fund Association Board of Directors, said the legislation was unnecessary last year and still is.

He said a Connecticut law requiring disclosure of conflicts of interest would duplicate federal securities requirements and could become a financial burden for hedge fund managers -- an important source of personal income tax revenue to the state.

"In this economic climate, it is simply bad policy," Burnjes said.

Andrew Schneider, founder and owner of Hedgeco Networks, a hedge fund research and services firm, said his company has helped set up more than 400 hedge funds. He said conflicts of interest were disclosed in documents, such as the prospectus. (AP)