Thursday, July 01, 2004

SEC Eyes Hedge Fund Regs

SEC Eyes Hedge Fund Regs

The Securities and Exchange Commission has discovered more than 40 hedge funds that have been involved in improper and illegal mutual fund trading, Laura Cox, senior adviser to SEC chairman William Donaldson, told the Post.
That figure is among the reasons Donaldson and two of the SEC's five Commissioners are eager to intensify the agency's scrutiny of the hedge fund industry by requiring that they register as investment advisers.

Such a requirement would allow the SEC to conduct routine audits and to learn more about the approximately $850 billion industry.

The SEC is expected to vote in mid-July to put forth for comment a proposal to require registration.

Commissioners Paul Atkins and Cynthia Glasssman — the SEC's two Republican representatives — have expressed skepticism about the measure. Atkins has questioned whether the agency had the resources to police the massive and growing industry, while Glassman is fearful registration could be interpreted as an SEC seal of approval, attracting small investors.

Opponents of regulation have pointed out that about two-thirds of the largest 100 hedge funds are already registered with the Commodity Futures Trading Commission, and about 25 percent of hedge fund managers are currently registered as investment advisers.

Hedge funds are largely unregulated investment vehicles that generally cater to the rich. In a report published last fall, the SEC disclosed that it had filed 41 fraud cases against hedge funds.


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