Third Party Marketing Under Pressure

May 27, 2010

Third party marketing firms are independent sales and marketing companies with a Rolodex in the hedge fund industry and use those contacts to raise money for hedge funds. They are registered as broker-dealers with the SEC and help hedge fund managers navigate the advertising waters in accordance with the restrictions of Regulation D. They play an important role, especially in early stage funds.

After a couple years of financial market turmoil, these independent marketing firms are feeling the regulatory pressure. There will continue to be change in the industry and new regulations that will need interpretation in order to give clear direction to third party marketers.

For marketers planning and conducting business in 2010 will continue to be a challenge. Understanding the direction in which the new rules are headed is different from knowing where they will finally land. Operating an independent hedge fund marketing firm in the current environment is more difficult that at any time in the past.

The Best Way to Predict the Future? Create it

Peter Drucker’s quote about creating the future holds true for third party marketing. Only a few months ago, there were significant rumblings of an all out ban on third party marketing. That bullet was dodged now that FINRA has stepped-up to provide oversight for the industry. Of course, the question remains, “what exactly does this mean?”

Groups like the Third Party Marketers Association are working closely with FINRA to have a voice in the new regulation and avoid any big surprises. And FINRA is not the only entity involved. Third party marketers are facing new rules from two huge states as well – California and New York.

With all the changes in process, the best advice is to stay in tune with the changes as they are happening and be prepared to make some moves of your own in order to stay compliant and work within the new rules.

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