Fed Official Sees Major Role For Investors In Reforming Hedge Practices

Apr 19 2007 | 10:45am ET

A U.S. regulatory official had some tough words for hedge funds yesterday, but stuck to the party line that the market is the key to controlling risks.

Jim Embersit, the deputy associate director for market and liquidity risks at the Federal Reserve’s Division of Banking Supervision, said that hedge funds, and the banks that lend to them, have “considerable work” to do to standardize and improve credit terms, risk measurement and transparency. But he laid responsibility for those changes squarely at the feet of investors.

“This is an area that is crying out for leadership in the investor community,” he said, speaking before an audience at New York University's Stern School of Business. “Investors should seek assurances that hedge funds are complying with risk management practices.” He also said that “more work needs to be done in dealer banks.”


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