SEC Proposes Quarterly Reporting For Biggest Hedge, Private Equity Funds

Jan 25 2011 | 1:57pm ET

The biggest hedge funds in the U.S. will face the toughest regulatory burden under a new risk-reporting rule proposed today by the Securities and Exchange Commission.

The SEC unanimously voted to seek comment on the new rule, which would require hedge funds, private equity firms and other private investment fund advisers to maintain a wide range of information for sharing with regulators. The proposed joint rule with the Commodity Futures Trading Commission will be considered by that regulator tomorrow.

The new rule, required by the Dodd-Frank financial regulation reform law, will fall most heavily on firms managing more than $1 billion in assets. SEC Chairman Mary Schapiro notes that the 200 such firms in the U.S. control more than 80% of private fund assets under management.

"The information required would be 'tiered' so that we would receive more detailed information from larger private fund advisers, rather than imposing the same reporting requirements on all private funds," Schapiro said. "While the group of large private fund advisers is relatively small in number, it represents a large majority of private funds' assets."

Those firms will be required to make quarterly reports on assets, leverage, positions, valuation and trading. That information will be shared by the SEC and CFTC with the Financial Stability Oversight Council.

Today's vote opens a 60-day comment period.

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