Fed Chief Repeats Opposition To Hedge Fund Regulation

by Carla Johnson, Investors Offshore.com

26 August 2004

In a written response to questions from Senate lawmakers, Federal Reserve Chairman Alan Greenspan on Tuesday reiterated his belief that US hedge fund investors do not need protecting with more regulation

"There is no evidence that investors in hedge funds today are any less sophisticated than they were in 1999," wrote Greenspan, responding to a question from the Chairman of the Senate Banking Committee, Richard Shelby, according to Reuters.

"Indeed, institutional investors have accounted for a growing share of hedge fund investments, and they can and should protect their own interests rather than rely on the limited regulatory protections that would be provided as a result of a registration requirement," he added.

Greenspan has been an outspoken critic of proposals being studied by the Securities and Excahnge Commission that will force hedge funds to register with the regulator and allow more access to their internal workings.

"My problem with the SEC's current initiative is that the initiative cannot accomplish what it seeks to accomplish," and will do very little to prevent cases of fraud, Greenspan told the Banking Committee last month.

SEC chiefs had voted 3-2 to put the proposals to a 60 day public comment period.

"It is imperative that the commission be proactive and have the means to detect and prevent emerging, but as of yet unforeseen, harms and abuses that could work against those newly exposed to hedge funds and those on the other side of transactions with hedge funds," SEC chairman, William Donaldson, a firm advocate of registration, commented at the time.

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