Securities and Exchange Commission Chairman Mary Jo White is pushing to adopt a rule allowing hedge funds to advertise in a move consumer advocates say could fail to protect unsophisticated investors, according to two people familiar with the matter.
White, who became SEC chairman on April 10, has suggested the commission pass the plan without major changes and add additional protections later, said the people, who declined to be identified because the deliberations are private.
The approach would placate congressional Republicans who have complained the SEC has slow-walked the rule, which was required to be completed by July 2012.
Approving the hedge fund regulation would allow White to make good on a promise she made in her Senate confirmation hearing to prioritize rules mandated by the Jumpstart Our Business Startups Act, which was designed to boost capital-raising and job-creation. At the same time, it could anger advocates for small investors.
“It would be a very bad sign — a cause for grave concern about the substance of the issue and process of how investor protection concerns are addressed,” Barbara Roper, director investor protection at the Washington-based Consumer Federation of America, said in a phone interview. Roper said she discussed the rule with White and other SEC officials on April 23.
John Nester, an SEC spokesman, declined to comment on White’s plans.