SEC Registration 'Positive,' Moody's Says

Jun 28 2011 | 12:24pm ET

The hedge funds may be grumbling about it, but the Securities and Exchange Commission's registration requirement is good news for everyone, according to Moody's Investors Service.

The ratings agency said in a report issued yesterday that new rules requiring the largest hedge funds and private equity firms to supply the SEC with more information "is positive for the operation quality of hedge funds," Moody's offered.

"The new rules represent a positive turn in the $2 trillion hedge fund industry, which has often been considered secretive and opaque," Moody's said. "The resulting increase in transparency, accountability and regulatory oversight will enhance the minimum operational quality standards of hedge funds and therefore provide more safeguards for investors."

Under a new rule adopted earlier this month and coming into force in March 2012, alternative investments firms with more than $150 million—about 750 firms—will have to register with the SEC and provide greater disclosures to the regulator than ever before.

Moody's acknowledged that the new rule comes at a "price, particularly for small- to mid-sized managers." But its report predicts that "greater legal and administrative costs" will be "manageable for them."


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