Senate Banking Committee To Discuss Hedge Fund Regulation

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

21 July 2006

The US Senate Banking Committee this week unveiled plans to discuss the regulation of hedge funds at a meeting on July 25.

The regulatory regime for the investment vehicles is currently in some confusion, after a Securities and Exchange Commission rule requiring the majority of hedge funds to register with the Commission was last month thrown out by a federal appeals court.

However, late last month, Congressman Barney Frank, the Ranking Democratic Member on the House Financial Services Committee introduced legislation to authorize the registration and monitoring of hedge funds, attempting a reversal of the Court of Appeals decision.

Frank stated at the time that his legislation, known as the 'Securities and Exchange Commission Authority Restoration Act of 2006,' would give the SEC clear authority to require registration and monitoring.

“Given the increasing size of hedge funds and the growing role they are playing in the economy, it would be a grave error to allow the court decision denying any authority by the SEC to stand,” commented Frank.

“At the very least Congress should give the SEC the power it has sought to require registration, and we should also be looking into whether any further SEC or regulatory authority regarding hedge funds is needed," he added.

In order to provide the SEC with the clear authority to require registration of hedge fund advisors under the Investment Advisors Act, the bill would authorize the Commission to re-interpret the term “client”, thereby requiring registration of advisors to funds that have more than 15 investors.

The Senate Banking Committee has not yet announced a list of witnesses for the forthcoming meeting.

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