| NEW YORK, Aug. 6
NEW YORK, Aug. 6 The scandalous implosion of
the Bayou Group hedge fund in 2005 gave fodder to legions of
critics demanding reform in the powerful but secretive
The industry managed to beat back most measures, including
a move backed by U.S. securities regulators to force firms to
register as investment advisers, but one group is looking to
protect the business's image.
The New York Hedge Fund Roundtable is seeking to establish
professional standards to self-police the lucrative industry,
both to prevent future scandals and avert the imposition of new
laws on the $2 trillion industry.
"It's a great industry. We don't want to see it blown up
because of a few bad guys," said Stanley Goldstein, founder of
the ad hoc group, which meets regularly to discuss industry
issues. "The industry has a public relations problem. It's hard
to find good press for hedge funds."
Goldstein, 73, the retired founder of accounting firm
Goldstein Golub Kessler & Co and of several hedge funds, said
professional associations -- like the New York State Society of
Certified Public Accountants -- can exert powerful peer
pressure on those who work in an industry.
Many hedge fund managers belong to self-policing financial
industry groups, but none of those groups provide the
imprimatur of the NYSSCPA, the American Institute of Architects
or the American Medical Association.
"Peer pressure will make a big difference," said Goldstein.
He said that when he started out as an accountant in the early
1960s, bribing Internal Revenue Service agents was common
practice among smaller accounting firms seeking to make tax
problems go away.
That practice was virtually halted by federal prosecutions
and self-policing moves by groups like the NYSSCPA, which
developed and imposed professional and educational standards
for their members, he said.
"They said, 'If you don't follow our rules, you won't get
on a committee,'" said Goldstein. And being on a professional
society committee, he said, "is a powerful credential,"
something of a Good Housekeeping seal that clients recognize
Some observers say it may be just the right time for a
professional society for hedge fund managers: Hedge funds have
grown from a cottage industry three decades ago to one
estimated to hold $2 trillion in 12,000 funds today.
"Certainly, a self-regulatory organization would be a
wonderful idea for the industry," said Leon Metzger, a veteran
senior hedge fund industry executive who now teaches hedge fund
strategies at Yale, Cornell and New York University. "It might
forestall regulatory oversight by a federal agency (the
Securities and Exchange Commission) that is already stretched
to its limits."
Goldstein said the New York Hedge Fund Roundtable is
looking to develop such an organization. It could be up and
running sometime next year, he said.
The Roundtable was formed five years ago and now has nearly
1,000 members. Its website is at
(Editing by John Wallace)
(Reuters email: email@example.com. 646 223