WASHINGTON — For the first time, hedge funds will be allowed to advertise to the general public under a rule adopted Wednesday by federal regulators.
The Securities and Exchange Commission voted 4-1 to lift a decades-old ban that prevents hedge funds, private equity firms and other private investment managers from marketing their products to a wide audience.
Hedge funds are still allowed to sell securities only to an exclusive group of investors: those with a net worth of at least $1 million excluding their primary residence, or annual income of more than $200,000 in each of the two most recent years. About 7.4 percent of U.S. households have a net worth of $1 million or more.
The change, which takes effect in about 60 days, was mandated by legislation enacted last year. The law also makes it easier for small startup companies to raise capital without having to comply immediately with SEC reporting rules.
Hedge funds are investment pools that use complex trades to seek big returns. They command trillions of dollars in assets. The ban on general advertising has been in effect since 1933, during the Great Depression.