Whereas the previous decade marked a period of heightened regulation, the current Trump era is being seen as a move away from regulation. The function of financial regulators was to a large extent haunted by the Bernie Madoﬀ scandal and many government agencies sought to prevent the shortcomings of agencies like the SEC, by what many saw as an overshoot.
While it was necessary to strengthen the method which regulators used to oversee the market, many financial players viewed the changes as a consequence of the need for regulators to take revenge or exact payback against traders, for the SEC’s shortcomings. The response by the SEC was a sharp rise in regulation and the consequent closure of about seventy-five percent of hedge funds.
SEC officials targeted smaller hedge funds who had below five hundred million under management, who did not have the resources to finance legal costs for lengthy investigations and were consequently compelled to bow-out, by closing their operations.
Many analysts believe that Mark Cuban and the likes of former hedge fund manager Gad Grieve were victims of the SEC’s need to enact revenge. Cuban and Grieve were landed with civil filings for numerous regulatory violations. Mark Cuban successfully defended the civil suit against him and in a landmark victory had all of the respective allegations dismissed.
Analysts argue that in both Cuban and Grieve’s case the SEC were exacting a general line of retribution against traders, motivated by the need to show that the regulatory body was alive, well and that their existence was justified. The result was that thousands of hedge funds closed their doors, due to the heightened regulatory environment.
The sharp ascent of the start-up industry and the success stories of Facebook, Spotify, Snapchat, Whatsapp, Waze etc. has to a large extent replaced the hedge fund vacuum, created by the mass exit of hedge fund managers from the sector.
The inauguration of a new President in that of Donald Tump has led to a new mindset, which is not so hamstrung by the Madoﬀ debacle, and the need to make a point or rectify previous failings. This new stance ushered in a wave of changes, targeted at deregulating a financial industry, a sector already perceived by economists as over regulated.
The trend for deregulation is not expected to lead to any mushroomed growth in the hedge fund space, given that the risk return ratio and intrinsic regulatory risk in the financial securities sector, still remains relatively unattractive. Initiatives and growth in the start-up industry are still anticipated to prosper.
These developments auger well for more efficient regulation by federal bodies like the SEC, more jobs and a higher level of growth for the economy. For more visit http://washingtonreview.blogspot.com/2017/11/cuban-and-grieve-were-scapegoats-for.html