US ruling may slow hedge fund compliance hiring

The US Securities and Exchange Commission has been dealt a blow in its efforts to regulate hedge funds. One consultant says it could impact hiring this side of the Atlantic.

"It may be more difficult to make a business case for expanding the compliance function if hedge funds can't point to the need to adhere to SEC regulations," says Stephen Burke, a director of compliance-focused IMS Consulting.

The blow to the SEC's attempt to require all US hedge fund managers with 15 or more investors to register with the agency came earlier this week. The District of Columbia Court of Appeals ruled unanimously that the SEC had gone too far in defining hedge fund investors as clients of hedge fund managers.

The court described the resulting need for hedge funds to register with the regulator as 'arbitrary' and threw it out. The SEC is expected to seek permission to appeal to the US Supreme Court.

Regulatory intervention has promoted hedge funds to add swathes of compliance staff. But Burke says the recent brouhaha is unlikely to lead directly to job cuts in the UK, where the Financial Services Authority is keeping increased tabs on local hedge fund operators. Jobs may yet go in the US, he concedes.

Separately, and irrespective of events at the US regulator, Burke says IMS Consulting is itself hiring. Having already added two new consultants this month, he says the company is looking to add another compliance consultant and a new member of its FSA applications team this summer. "We're seeing double digit growth in the number of hedge funds looking to register with the FSA," he explains.