SEC Commissioners Bad-Mouth Hedge Fund Rule

by Mike Godfrey, Tax-News.com, Washington

15 March 2006

SEC Commissioner Paul Atkins is making no secret of his distaste for the body's new powers to oversee hedge funds, and along with colleague Cynthia Glassman has criticized them in two recent speeches.

Addressing the 'SEC Speaks' conference he mentioned 'the controversial hedge fund registration rule that dissipates our scarce examination resources and does not add to our enforcement authority'. And speaking before the IA Compliance Best Practices Summit 2006, Atkins said the addition of hedge fund advisers to the registration rule "could greatly impair our ability to oversee other investment advisers, whose activities are much greater consequence to the investing public, based on sheer numbers alone."

Atkins thinks that hedge fund fraud, when it happens, is not likely to be committed among the funds that register, and says that the SEC already has "broad authority under the securities laws" to go after such offenders. "Would it not be ironic if the hedge fund rule increased the regulatory burden on non-hedge fund advisors, as well?" asked Atkins.

Last year, speaking at a meeting of the Managed Funds Association, Mr Atkins predicted that the SEC will struggle to cope when new hedge fund registration rules came into force, explaining to MFA members that:

"Just as some of you are working hard to prepare to deal with us, we at the SEC are struggling to get ready to deal with you. We have neither the resources nor the expertise to oversee all of the potential new registrants."

He warned that: "The SEC's current budgetary problems make it unlikely that we will be able to hire more examiners in response to the increased registrant pool."

Commissioner Atkins is careful however not to criticize new SEC Chairman, Christopher Cox, observing that: "Chairman Cox comes to the job as an insightful, engaged, enthusiastic leader. I anticipate that we will see a renewed, receptive approach to regulation overall. As a consequence, I hope that we will see a reasoned approach towards the implementation of the hedge fund rule."

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