President Obama has proposed a number of reforms to America’s financial regulations, changes many argue are necessary to prevent another economic meltdown. But could the measure hold some unintended consequences for telecom?
You see, one of the revisions would order hedge funds and other private capital investors to register with the Securities and Exchange Commission. That would mean complying with record-keeping rules; providing disclosures to investors, creditors and other parties; and sharing, confidentially, assets under management, any borrowing, off-balance sheet exposure and “other information necessary to assess whether the fund or fund family ... poses a threat to financial stability,” according to the draft law.
On the surface, none of these requirements impacts telecom all that much, insiders say. In fact, hedge funds – those high-risk investments that pushed Wall Street over the edge in 2007 – need a more watchful eye, they say. Dig a little deeper, though, and the potential for negative effects on telecom comes to light.
For example, CLEC access to large pools of capital could diminish because of fewer leveraged funds in the hedge fund world, said Rich Buchanan. He’s chief marketing officer of Ooma, the Silicon Valley startup that recently raised $18 million in what it said is its final round of venture financing before it turns profitable. Securing that kind of money in a recession makes Ooma a bit of an expert on the system in tough times. To that end, “more conventional financing will be required for the highly capital-intensive buildouts some vendors may have planned,” Buchanan said.
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