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That story is title does not come from me; it's a quote
Troy A. Paredes of the Securities and Exchange Commission.
We cannot simply focus on the costs and benefits of a
single rule change on a stand-alone basis. It is the totality of the regulatory
infrastructure that impacts the private sector. As part of this analysis, we
need to be mindful of compliance costs. It is costly for firms to comply with
the regulatory obligations they confront both in terms of out-of-pocket expenditures,
as well as the opportunity cost of the time and effort of personnel that could
have been directed toward other productive endeavors. Indeed, the compliance
burden on investment advisers has increased of late due to, for example, the
need to comply with the new "pay-to-play" rule restricting political
contributions; the recent amendments to Part 2 of Form ADV concerning the
preparation and delivery of a "brochure" and "brochure supplements" to advisory
clients; and the recent amendments to the custody rule.
The Commissioner was giving a speech to the Hedge
Fund Regulation and Current Developments symposium at the Center for Law,
Economics & Finance at the The George Washington University Law School on
There was lots of blame thrown at the hedge fund industry
after the financial crisis of 2008 with very little data to support the
accusations. Commissioner Parades also addressed this point:
Regulatory decision making should be supported by data,
to the extent available, and economic analysis. This is particularly important
to stress insofar as the SEC is concerned, because the SEC is an agency that
traditionally has overwhelmingly been comprised of lawyers. Empirical analysis
must be much more central to decision making at the SEC than has been the case.
Commissioner Parades is just one of five commissioners,
so his position is not necessarily a controlling influence. But it's still good
to see that at least part of the SEC is focusing on there being better
regulatory, not just more regulatory control
Speech by SEC
Commissioner: Remarks at the Symposium on "Hedge Fund Regulation and Current
For additional commentary on developments in
compliance and ethics, visit Compliance Building, a blog hosted by Doug Cornelius.
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