New Regulatory Framework for Units of Nonregulated Collective Investment Schemes in Japan

Abstract

Collective investment schemes (CIS), including hedge funds and private equity funds that are not strictly regulated by special laws and regulations for CIS (hereinafter non-regulated CIS), are at the center of international debate as to how they should be regulated. According to the reports of the International Organization of Securities Commissions (IOSCO)1) and Financial Stability Forum (FSF), there is over US$1.6 trillion in hedge fund assets under management worldwide and the number of funds has steadily grown to more than 9000,2) the vast majority managed in the USA and the United Kingdom.3) Hedge funds are not legally defined in any country, and are characterized by high management fees and a number of different complex and active strategies aiming for a high yield. They are frequently structured

in such a way as to avoid or minimize regulation. They are therefore usually exempt from direct regulation and are not constrained by regulatory capital requirements and public disclosure requirements.4)