5.26.2009 The Senate of the State of Connecticut passed a bill called “An Act Concerning Hedge Funds” (SB 953) that would require investment advisers to hedge funds located or doing business in that state to inform investors about any material conflicts of interest. The law if enacted would apply only to non-SEC registered advisers.

Hedge funds regulated under the proposed law would be required to provide enhanced disclosure to prospective and current investors, including the following:

  • Reporting, no later than 30 days prior to any investment, conflicts of interest that would impair the adviser’s ability to carry out its duties and responsibilities to the hedge fund or its investors;  
  • Providing written disclosure of any material change in the hedge fund’s investment strategy and philosophy; the departure of certain key persons; the existence of any side letters; and major litigation or governmental investigation involving the hedge fund; and  
  • On an annual basis commencing January 1, 2010, providing written disclosure regarding fees paid by the hedge fund (e.g., management, brokerage, and trading fees), and a financial statement indicating that the investor’s capital account was audited by an independent auditing firm.  

In addition, hedge funds regulated under the proposed law would be prohibited from admitting natural person investors who, individually or jointly with a spouse, have less than $2.5 million in investments.  

The bill has been sent to the state’s House of Representatives for approval.  

Click http://www.cga.ct.gov/2009/TOB/s/pdf/2009SB-00953-R00-SB.pdf to access the bill.