US And UK Regulators Explore Hedge Fund Regulation

by Mike Godfrey, Tax-News.com, Washington

22 September 2009

The US Securities and Exchange Commission (SEC) and the UK Financial Services Authority (FSA) have announced plans to explore a common approach to reporting and other regulatory requirements for hedge funds and their advisors.

The announcement came after a meeting of the SEC-FSA Strategic Dialogue, through which SEC and FSA leaders meet periodically to discuss areas of mutual interest. This was the fourth such meeting. The purpose of the Dialogue is to engage at senior levels on current matters impacting the US and UK capital markets and areas of future collaboration.

In a press release after the meeting, the SEC and FSA confirmed that they have agreed to identify a common, coherent set of data to collect from hedge fund advisors/managers to help them identify risks to their regulatory objectives and mandates. Other issues discussed at the meeting included over-the-counter derivatives markets and central clearing; accounting issues; regulatory reform; credit rating agency oversight; short selling; and corporate governance and compensation practices.

The SEC’s Chair, Mary Schapiro, said: "As the regulators of two of the world's major market centers, the SEC and the FSA have a strong interest in collaborating with respect to OTC markets and hedge funds, credit rating agencies and other market participants with cross-border operations. Only through strong cooperation can we achieve coherent oversight of global actors and limit opportunities for playing the regulatory seams."

The FSA’s Chief Executive, Hector Sants, said: "The global crisis has underlined how intertwined financial markets and institutions are and regulators around the world have to work together to ensure appropriate oversight. We are all working alongside the Financial Stability Board and other international regulatory committees to drive forward global financial reforms. The strategic dialogue with the SEC is a valuable component of the discussions around these reforms, particularly in areas of joint interest and in identifying potential regulatory gaps."

The SEC and FSA said that they have worked together closely to address the recent financial crisis, both on a bilateral basis as well as in international organizations, such as the International Organization of Securities Commissions. The US Administration itself has recently proposed legislation to require all advisors to hedge funds and other private pools of capital to register with the SEC. However, as yet, none of the proposed bills has been passed.

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