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Let us solicit!

Hedge fund Bulldog Investors is suing the SEC, arguing non-registered funds have a right to advertise.

Hedge fund manager Phil Goldstein is taking the Securities and Exchange Commission to court ? again. In 2006 Goldstein successfully blocked the regulator from requiring hedge funds to list. Now he wants the SEC to lift a ban that prevents non-registered investment funds from marketing to the public.

These funds are currently only allowed to advertise to accredited investors as defined by Regulation D of the Securities Act of 1933. Some funds have interpreted this to mean they cannot talk to the press about or post any information in the public domain about funds in the market. The SEC has never prosecuted a fund manager for a violation of this de facto ban, but the specter remains that it might some day.

In 2003 the SEC staff proposed a relaxation of the ban, stating that ?there seems to be little compelling policy justification for prohibiting general solicitation or general advertising in private placement offerings of?Funds that are sold only to qualified purchasers.? But the SEC has not yet acted on the recommendation.

At issue in this case is a website for Goldstein's firm, Bulldog Investors. The site is currently inactive, according to the firm, because of an enforcement action incurred after the hedge fund responded to an email inquiry from a visitor to its public website, brought against the firm by the Secretary of the Commonwealth of Massachusetts. Goldstein said in a statement that he believes there is ?significant uncertainty? as to whether a hedge fund can legally operate an open website without running afoul of the SEC.

?We believe that (1) a ban on hedge fund websites and electronic communications with website users does not provide protection to investors, and (2) the First Amendment applies to all websites and communications that provide truthful and nonmisleading information about products and services that may legally be sold to qualified persons, including the websites of hedge funds,? the statement says.

At press time Goldstein was planning to file suit in the Washington DC district court in the next few weeks. If he is successful, hedge funds and private equity funds would have license to talk openly about their fundraising efforts without fearing punitive measures from the SEC. But given both industries' well-known aversion to the public eye, it is unclear if either would take advantage of this new-found freedom.

CVCA hails 2008 budget reforms
The CVCA, Canada's Venture Capital and Private Equity Association, has issued a statement in strong support of certain measures contained in the 2008 federal budget, particularly those designed to enhance Canada's cross-border business and investment environment. The trade group has advocated for the removal of certain Canadian tax filing requirements for non-resident investors in circumstances where no taxes are payable. ?Significant barriers to cross-border investment ? the onerous Section 116 and non-resident tax filing requirements ? are now being eliminated. These changes will promote the growth of the Canadian venture capital and private equity markets at no cost to Canadian taxpayers,? said Rick Nathan, president of the CVCA and managing director of Kensington Capital Partners. Other reforms include changes to the SR&ED (Scientific Research and Experimental Development Tax Credit Program) regime that CVCA views ?will assist venture capital backed companies to improve their competitiveness in the global economy.? The group also praises the extension of accelerated CCA treatment for investments in machinery and equipment aimed to provide assistance to PE-funded companies in the manufacturing sectors.

Vestar promotes CFO to Executive VP
New York-based Vestar Capital Partners has announced the promotion of Brendan Spillane, who also serves as corporate CFO, to the position of executive vice president. The firm has a separate CFO role for fund administration, a position held by managing director Brian Schwarz. Spillane joined Vestar as a Vice President in 2006. Previously, he was CFO of SV Investment Partners, the U.S. affiliate of Schroder Ventures. Prior to that, he was CFO of Schafer Capital Management after starting his career in the audit practice of PricewaterhouseCoopers. Vestar currently manages funds with committed capital totaling approximately $7 billion and has offices or affiliates operating in Denver, Boston, Tokyo, Paris, Milan and Munich as well as New York.

European Commission lobbies for a united approach
The European Commission issued a paper to the European Parliament, Council and other relevant European bodies encouraging a common approach towards regulating sovereign wealth funds (SWFs) in the EU, according to a recent client memo from the law firm Linklaters. The Commission argues a single approach would ensure that Europe has a stronger voice in the international debate over SWFs. The memo takes note that the Commission has not recommended that the EU follow the US or Australian models with specialist foreign investment committees dedicated to SWF activities. Linklaters reports that the Commission's recommendations stress five guiding principles: commitment to an open investment environment in the EU and elsewhere; support of multilateral work by international organizations, such as the OECD; use of the existing legal framework at the EU and Member State level to respond to SWF controversies; respect by the EU and Member States of EC Treaty obligations and international commitments and the taking of proportionate, predictable and transparent measures in relation to SWF investment. The Commission is currently seeking to secure EU-wide endorsement for its proposals at the Spring European Council in mid-March of this year.