Hedge Fund Regulation
On the Horizon?
By Ryan Ellis
•
Monday, June 8, 2009 4:42 pm
The hits on private markets keep coming. This from today's Congress Daily AM:
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It is almost a given that hedge funds, private investment vehicles for the wealthy that engage in risky strategies such as short-selling and derivatives, will be further regulated. Lawmakers at a minimum are likely to require hedge funds to register with the SEC after a federal appeals court threw out such a mandate.
Lawmakers are concerned that the funds operate with little oversight and transparency. The industry does have some scars: In 2007 Amaranth Advisors LLC collapsed after losing $6 billion quickly in the natural gas trading market, and Bear Stearns' troubles began after two of its hedge funds invested heavily in the subprime mortgage market.
But some lawmakers are pushing for tougher regulations. Sens. Carl Levin, D-Mich., and Charles Grassley, R-Iowa, have sponsored legislation that would require naming the beneficial owner of the hedge fund, explain its ownership structure, spell out the names of any financial institutions with which the hedge fund is affiliated and disclose the minimum investment commitment required from an investor, as well as the total number of investors in the fund.
The measure is likely to be opposed by the industry, led by the Managed Funds Association, where former Rep. Richard Baker, R-La., serves as its president. But Grassley and Levin are influential legislators who enjoy taking on populist causes against Wall Street. In addition, lawmakers will have to decide whether to include industries beyond hedge funds for any registration requirement, such as private equity and venture capital firms. Those groups oppose being lumped in with hedge fund regulations.
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