The money manager Steven Rattner has an op-ed in the Times opposing a provision in recently enacted legislation that allows private equity and hedge funds to advertise. He writes:
For the first time, private equity and hedge funds will be able to advertise — and thereby separate inexpert individuals from their savings. Putting money in these alternatives is yet another type of investing that Americans shouldn't try at home. Until now, only a small percentage of Americans who qualified to invest this way (the law requires they have an income of $200,000 per year for an individual or a net worth of $1 million) did so. The possibility that advertising will lure more people to participate does no one any favors. Besides, these days, the most successful private equity and hedge funds can already raise all the capital they can efficiently manage without advertising.
So I'll wager that most of this new advertising will come from firms that sophisticated institutional investors wouldn't consider investing in. No wonder that the Securities and Exchange Commission, whose former chairwoman Mary Schapiro opposed the legislation, has been taking its time writing the regulations to implement these provisions.
Maybe if Mr. Rattner had been legally allowed to advertise his money management skills, he wouldn't have been reduced to raising money for his own firm by hiring campaign consultants (like Hank Morris) who were cozy with the state and local government officials (like Alan Hevesi) who controlled pension funds for government employees, or to offering favors like helping the brother of a New York state pension official get a DVD distribution deal for the movie "Chooch." The pension funds are the "sophisticated institutional investors" that Mr. Rattner is talking about. I've been a defender of Mr. Rattner from overly jealous prosecution on these matters, but the lack of self-awareness or reflection on his own case that Mr. Rattner displays here is a bit much even for me.
The other problem with Mr. Rattner's whole approach here is that it proceeds on a utilitarian basis (how best to protect those dim-witted chump investors), rather than a right-based approach (individuals have the right to free speech, so the individual hedge fund or private equity managers have a right to commercial speech to promote their business, so long as the speech is not fraudulent). If Mr. Rattner thinks it is acceptable on a moral and constitutional basis to ban advertising whenever the advertised product might be bad or risky for the consumer, why stop at hedge funds and private equity funds? Why not go further and ban all alcohol, casino and state lottery advertising, along with ads for foods and drinks that have added sugar, ads for motorcycles, and ads featuring fashion models that might set a poor example by being too tan or too thin? Imagine the ridicule and uproar that would arise if some conservative were to suggest the government ban on advertising by the New York Times on the grounds that the ads pose the risk of luring in readers who aren't sophisticated enough to see past the left-wing world view advanced in the Times' pages.