SEC Finalizes Hedge Fund, Private Equity Reporting Rule

Oct 27 2011 | 6:47am ET

The U.S. Securities and Exchange Commission yesterday approved a new rule that will require the country's largest hedge funds to disclose vast quantities of information to the regulator.

The commission unanimously approved the new information-gathering measure after easing its stringency somewhat. Where the original proposal, issued in January, would have forced all hedge fund and private equity firms with at least $1 billion in assets to make the confidential disclosures quarterly, the new rule imposes that requirement on hedge fund managers with $1.5 billion in assets or more and private equity firms with $2 billion or more. The latter will even be spared quarterly reports, instead filing the new Form PF annually.

The new rule also gives firms more time to make their reports, 60 days instead of 15 for hedge funds and 120 days for private equity firms.

All hedge and private equity fund firms with at least $150 million in assets will now be required to make some disclosures to the SEC. But only the biggest, roughly 230 hedge funds and 155 private equity firms, will be subject to the most stringent requirements, which will include information on assets, leverage, positions, valuation and trading.

The very biggest firms—those with at least $5 billion in assets—will have to begin reporting after June 15 of next year. Smaller firms will begin making their disclosures after Dec. 15, 2012.

Alternative investments firms have complained that the new rules would impose unnecessary costs. SEC Chairman Mary Schapiro said before yesterday's vote that she hoped the final version of the rule would "address the dramatic lack of private fund information available to regulators today while easing the burden on private fund managers producing the data."

The rule still requires the approval of the Commodity Futures Trading Commission. That is expected to come within a few days.

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