According to the report from the Wall Street Journal, the US Securities and Exchanges Commission (SEC) is allegedly preparing to investigate nearly 100 cryptocurrency-based hedge funds.
The US Securities and Exchange Commission (SEC) will inspect dozens of cryptocurrency hedge funds. In order to prevent people from their risky trading policies and higher fees vs. traditional investment funds.
Hence from this inspection, regulators want to ensure whether all the hedge funds are delivering their promises to investors or not, as per the report in The Wall Street Journal.
In the month of February, it was conveyed that the SEC had been examining the cryptocurrency market, issuing commands demanding information regarding the sales and pre-sales structure of Initial Coin Offerings. A number of notifications have been followed from the agency who recommended. Since that token sales probably violating securities laws.
The sophisticated trading strategies of the private hedge funds are traditional to SEC scrutiny. And these hedge funds are under SEC radar for the examination from many days. For instance, fund managers must be vigilant regarding the market funds, because beginner investors might confuse to understand the risks involved in such trading activities.
Hence, enforcement analysis presently underway with the SEC, this modern initiative is different. A source associated with the matter stated to the WSJ. However, that while inspectors will report any distrustful action they notice during the course of their investigation.
Marc Elovitz, a partner at Schulte Roth & Zabel LLP explained,
“This is a way for the SEC overall to gather information and learn about important new technology and products.”
Further, he included by saying that the character of inspectors is to educate the commission overall about new businesses or new industries.
Therefore, the process of investigation will commence within 2 months. Inspectors will find whether assets bought by fund managers are the same as the ones planned. However in disclosure documents when presented to investors.
Moreover, SEC will examine the accuracy of the cryptocurrency risk disclosures advertised to investors. Along with how the fund describes its strategy for trading cryptocurrencies.