Alan Greenspan Argues Against Increased Hedge Fund Regulation

by Glen Shapiro, LawAndTax-News.com, New York

17 February 2004

Speaking to the Senate Banking Committee on Thursday, Federal Reserve chief, Alan Greenspan criticised SEC proposals which would oblige hedge fund advisers to register with the regulator, arguing that the sophisticated investment vehicles should not be subjected to the same scrutiny as their retail counterparts.

"The value that these institutions have is to create a very significant amount of liquidity in our system. I think that while they have a reputation [as] a peculiar type of financial group, I think they've been very helpful to the liquidity and hence the international flexibility of our financial system."

Responding to Mr Greenspan's concerns, Securities and Exchange Commission official, Laura Cox told Reuters that:

"The SEC staff does not believe that their recommendation would impede the manner in which hedge funds operate, nor reduce the liquidity hedge funds provide to the marketplace. The proposal does, however, seek to enhance the ability of the SEC to address the types of problems that have been uncovered and to better ensure that investors are not the victims of misconduct."

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