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Proposed hedge fund registration may increase insurance requirements


March 16, 2007   by Canadian Underwriter


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Proposed National Instrument 31-103 which outlines registration requirements for hedge fund participants may significantly increase insurance costs for firms participating in hedge funds, according to a paper authored by Ronald Kosonic of Borden Ladner Gervais.
Posted on Borden Ladners Web site, Kosonics paper says minimum insurance requirements for firms with significant hedge fund assets or assets under management could run as high as $25 million in some cases.
We expect that the new capital and insurance requirements of proposed NI 31-103 will have a significant impact on hedge fund industry participants, Kosonic said in his paper.
NI 31-103 is principally designed to put in place a revised, nationally harmonized and streamlined hedge fund registration regime for firms and individuals. Kosonics paper notes proposed NI 31-103 is intended to expand or clarify existing regulation of hedge fund managers, advisers and distributors by:
increasing capital and insurance requirements across all categories of registration;
introducing a new category of registration for “investment fund managers”;
introducing a registration category of “exempt market dealer” across Canada;
introducing a new “business trigger” test for determining when registration is required;
changing proficiency requirements for individual registrants;
enhancing compliance and supervisory expectations;
governing referral arrangements; and
increasing financial reporting requirements


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