Canadian regulators have outlined their plans to boost their oversight of hedge funds, including proficiency tests for hedge fund managers and background checks for managers and sales staff, the Canadian Securities Administrator said at a news conference on Wednesday.
Under the proposed rules, companies that get paid for referring clients to other investment firms also will have to disclose that information.
Once hedge funds satisfy the regulatory criteria, their registration would be recognized by regulators across the country.
“It’s a big step in the long process of greater harmonization across the country,” Ontario Securities Commission Chairman David Wilson told Bloomberg in a telephone interview. “To have it all under one umbrella, one set of rules, right from coast to coast. There’s the big picture. It’s the first time ever.”
The agency will seek comments over the next four months before implementing the proposal by the end of the year, Randee Pavalow, director of capital markets at the OSC, said. A national registry of fund managers should be ready by April 2008, he added.
In January, regulators said they would require fund managers to register with the country’s provincial securities commissions as part of a multi-pronged attempt to prevent fund collapses, but at the time there was no indication fund managers would be tested.
FT Alphaville recommends they get cracking on their studies: Veryan Allen’s Hedge Fund Aptitude Test might be a good place to start.
And of course, any examination should require managers to define “alpha” in one sentence.