SEC Ready To Vote On Hedge Fund Regulation Plan

by Philip Morton, Investors Offshore.com

14 October 2004

According to a Reuters report, sources close to the US Securities and Exchange Commission have revealed that the regulator is scheduling a vote on its controversial hedge fund regulation plans for October 26.

The proposal, which will bring about a change in the definition of a client and compel virtually all US hedge funds to register with the SEC and undergo closer public scrutiny, is being opposed by the majority of the hedge fund industry, which has enjoyed minimal regulation in the past.

It has also drawn criticism from influential figures such as Alan Greespan, who has repeatedly shot down the idea of tighter hedge fund regulation as ineffectual, unnecessary and potentially damaging to the efficiency financial markets.

"My problem with the SEC's current initiative is that the initiative cannot accomplish what it seeks to accomplish," Greenspan noted in Congressional testimony earlier in the year.

He went on to add: "If placed under increasing restrictions, many will leave the industry - to the significant detriment of our economy."

Nonetheless, the Chairman of the SEC, William Donaldson, remains the registration plan’s firmest advocate.

After July’s preliminary vote to put the hedge fund registration plans to a 60-day consultation ended with an unusually divided 3-2 split, Reuters suggested that opinion within the SEC’s leadership is still deeply divided on the matter.

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