Which of the following statements is CORRECT?
A. Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States.
B. Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia.
C. Hedge funds have more in common with investment banks than with any other type of financial institution.
D. Hedge funds have more in common with commercial banks than with any other type of financial institution.
E. Hedge funds are not as highly regulated as most other types of financial institutions. The justification for this light regulation is that only "sophisticated" investors (i.e., those with high net worths and high incomes) are permitted to invest in these funds, and these investors supposedly can do any necessary "due diligence" on their own rather than have it done by the SEC or some other regulator.
Answer: E
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