Lawmakers Express Concern Over New SEC Hedge Fund Rule

by Phillip Morton, Investors Offshore.com

01 November 2004

The US Securities and Exchange Commission’s decision to implement its controversial hedge fund registration scheme has drawn a largely negative response from lawmakers and business representatives, it emerged last week.

Richard Shelby, Chairman of the Senate Banking Committee, indicated that the new rule, forced through on a 3-2 vote by SEC Commissioners last Tuesday, may require further investigation by legislators.

"I believe we must carefully balance investor-protection concerns with potential disruptions to our financial markets," Shelby said in a statement.

He added that the Banking Committee will “continue to look at this rule to ensure that it is achieving its intended purpose."

Meanwhile, Mike Crapo, who sits on the Banking Committee, was more forthright in his opposition, calling the new rule “contentious and controversial” and a “significant departure from the current regulatory framework” unlikely to accomplish the commission's stated goals.

Business interests have also expressed dismay at the SEC decision, such as the US Chamber of Commerce which suggested the regulator has “overreached its authority” and gone looking to solve a problem that in reality doesn’t exist.

“This rush to regulate could have significant negative implications for the strength of the capital markets and our overall economic health, without adding any new benefit or protection for investors,” warned David Hirschmann, the Chamber's senior vice president, echoing sentiments repeatedly expressed by Federal Reserve Chairman Alan Greenspan in recent weeks.

"We share the commission's goal of protecting investors' interests and detecting fraud, but layering on unnecessary regulations is not the answer," argued Mr Hirschmann.

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