The US Securities and Exchange Commission (SEC) has adopted a new rule to implement a JOBS Act requirement to lift the ban on hedge funds, private equity firms, and other private investment managers marketing products to a wide audience.
According to the rule, for the first time, hedge funds will be allowed to advertise to the general public.
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The rule amendments become effective 60 days after publication in the Federal Register.
The ban had been intended to protect unsophisticated investors from the risky, barely regulated investment pools that control more than US$2 trillion in assets.
The SEC first proposed lifting the ban in 2012 after Congress mandated the change in a 2012 law known as the Jumpstart Our Business Startups Act. The JOBS Act relaxes securities regulations to help encourage small companies to go public.
As part of its effort to guard against potential abuse, the SEC also adopted rules that disqualify felons and other bad actors from participating in certain securities offerings as required by the Dodd-Frank Act.
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By GlobalDataThe proposal issued by the Commission requires issuers to provide additional information about these securities offering.
Mary Jo White, chair of the SEC, said: "As we fulfil our mission to facilitate capital formation and maintain fair and efficient markets, the Commission must always focus on strong investor protections.
"We want this new market and the private markets in general to thrive in a safe and efficient manner, and these rules we adopt and propose are designed to facilitate that objective," White added.
