Wednesday, 23 July 2014
Last updated 10 hours ago
Jan 30 2009 | 4:05am ET
U.S. lawmakers may not have been able to come up with an economic stimulus plan with bipartisan support, but a new effort to regulate hedge funds can already boast the support of at least one top Republican.
Sens. Charles Grassley (R-Iowa) and Carl Levin (D-Mich.) yesterday introduced a bill that would require hedge fund managers to register with the Securities and Exchange Commission. The Hedge Fund Transparency Act would effectively overturn the 2006 federal appeals court decision Goldstein v. SEC, which struck down a 2005 SEC rule requiring hedge fund managers to register.
The proposal would also compel hedge fund managers to file an annual disclosure form, comply with the SEC’s record-keeping standards and cooperate with its investigations.
“The problem is that hedge funds have gotten so big and are so entrenched in U.S. financial markets that their actions can now significantly impact market prices, damage other market participants and can even endanger the U.S. financial system and economy as a whole,” Levin said.
“A major cause of the current crisis is a lack of transparency,” Grassley, a frequent critic of hedge funds, added. “The wizards on Wall Street figured out a million clever ways to avoid the transparency sought by the securities regulations adopted during the 1930s.”
Grassley introduced a similar bill two years ago and, along with Sen. Arlen Specter (R-Pa.), has been one of the SEC’s fiercest antagonists on Capitol Hill, leading the Congressional probe of an SEC investigation of insider trading at hedge fund Pequot Capital Management.
Hedge fund registration has already won the support of several key members of President Barack Obama’s economic team, including Treasury Secretary Timothy Geithner and SEC Chairman Mary Schapiro.
Less enthusiastic, unsurprisingly, is the always talkative Phillip Goldstein, the named plaintiff in the case that ended the SEC’s first effort to force hedge funds to register.
“Until the SEC responds in an effective manner to whistleblower complaints regarding fraud, what’s the point of adding new rules and regulations,” the Bulldog Investors founder told Bloomberg News, referring to the SEC’s repeated failures to catch the alleged $50 billion Ponzi scheme run by Bernard Madoff.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…