SEC Hedge Fund Report Published

by Carla Johnson, Investors Offshore.com

01 October 2003

As anticipated, the US Securities and Exchange Commission (SEC) on Monday released its report on the hedge fund industry, in which it recommended that hedge fund managers be obliged to register with the regulator, and submit to greater scrutiny.

"We currently lack the regulatory tools to monitor adequately the activities and operations of hedge funds and their investment advisers," SEC chairman, William Donaldson explained, continuing: "The commission needs to have a means of examining hedge fund advisers and monitoring their operations."

In the 134 page report, SEC staff expressed concern about the fact that the commission's current inability to examine the activities of hedge funds in any great detail leaves it "in a 'wait and see' posture vis-a-vis fraud and other misconduct".

"We believe that our examination program not only allows the commission to identify misconduct by registered investment advisers earlier, but it also assists in identifying and possibly preventing certain misconduct from developing into fraud," the report announced.

The recommendations made must now be approved by a majority of the five SEC commissioners. However, two of the five, Cynthia Glassman and Paul Atkins, have previously expressed reservations with regard to the registration of hedge fund managers, arguing that such a move would stretch the commission's resources and clash with other initiatives in the mutual fund sector.

Recommended