SEC Votes In Favour Of Increased Hedge Fund Regulation

by Glen Shapiro, LawAndTax-News.com, New York

16 July 2004

The US Securities and Exchange Commission (SEC) on Wednesday voted 3-2 to propose a rule which will oblige hedge fund advisers to register with the securities regulator.

The proposal, which would see hedge fund advisers providing similar information to the SEC as their mutual fund counterparts, has been sent out for 60 days in order to allow public comment, after which a final vote will take place.

It was supported by SEC chairman, William Donaldson, and Democratic Commissioners, Harvey Goldschmid and Roel Campos. Republican Commissioners, Paul Atkins and Cynthia Glassman voted against it.

In an interview with the Financial Times conducted before the vote, Ms Glassman expressed strong opposition, arguing that the SEC has "not developed a sound economic justification and used our economic resources as well as we could".

"First we need to make sure we know what the problem is. Then we need to figure out the appropriate way to address it, and I'm not convinced we've done that here," she observed.

However, for Mr Donaldson, the risks presented by the loosely regulated hedge fund sector are seemingly too large to ignore.

Speaking at an open meeting on Wednesday, he suggested that:

"The hedge fund industry is a $1 trillion corner along Wall Street, with 'warning signs' flashing at us. We simply can't afford to continue to walk by and ignore it."

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