The Ministry of Finance has proposed a suggestion to change current legislation to allow for the establishment and marketing of Special Funds in Norway.
The term ‘Special Funds’ includes funds that are often referred to as hedge funds. This is a general term for funds that are managed in a more flexible way than normal mutual funds. The goal of these funds is to provide a positive return independent of market developments through an alternative investment strategy. Today, the establishment and marketing of such funds is illegal in Norway, however Norwegian investors are allowed to purchase units in foreign hedge funds.
The Government’s proposal means that the marketing and sale of units in Special Funds can take place after prior investment advice that complies with the Securities Trading Act’s binding rules on investment counseling, has been given. The investment advisor is responsible for determining whether the investment is suitable for the client. The advice must be in accordance with the client’s investment goals and the client must understand the risks involved and be financially capable of handling the risk.
According to the proposal, Special Funds will receive a number of exceptions from regulations stipulated in The Act on Securities Funds allowing them greater flexibility than other mutual funds with respect to investment strategies. Among others, the government has suggested that the funds be exempt from regulations on; permitted investment advice, demand for risk diversification, prohibiting the taking up of a loan and against selling financial instruments the fund does not own. It has also been proposed that Special Funds can be closed for the issuance and redemption of units for a period of up to one year.
However, the legislative proposal emphasizes that the fund unit holders including special fund holders, are not responsible for more than invested capital.