Hedge Funds Get Off Easy In Regulatory Overhaul, For Now

Jun 18 2009 | 11:06am ET

President Barack Obama’s long-awaited financial regulation reform seems to have let hedge funds off relatively easy, for the time being.

While other jurisdictions, notably the European Union, consider substantially stricter measures to limit hedge funds’ activities, the Obama plan doesn’t have any specific restrictions at all. But there are signs that the U.S. administration may eventually impose more demanding regulations on the industry should it deem such measures necessary.

The centerpiece of Obama’s regulatory overhaul for hedge funds is the return of the hedge fund registration requirement, which was tossed by a federal court three years ago. Both houses of Congress are already considering the measure, which would require hedge fund advisers to register with the Securities and Exchange Commission.

Most hedge funds are already registered with the agency, Hedge Fund Research said in February, and most in the industry have dropped their opposition to mandatory registration in the face of potentially much harsher measures.

But some aspects of the Obama plan—including registration—may simply be the first shoe dropping.

The president’s plan still needs to be fleshed out, and Congressional leaders have yet to have their full say. Indeed, while the proposal calls for giving the Federal Reserve greater powers over systemically important financial firms, including the power to break them up, it does not yet precisely define just how big is too big, or how much leverage is too much.

And the administration indicated that hedge fund registration and the data collection that comes with it—including on-sight SEC inspections—may be a precursor to more heavy-handed regulation, if it is needed. The rules unveiled yesterday will help Obama’s team decide if hedge funds “have become so large, leveraged or interconnected that they require regulation for stability purposes,” the administration said.

RELATED STORIES:

Hedge Fund Group Warns Against Blanket Regulations
HedgeOp Compliance: How Obama's Proposals May Affect Hedge Funds

President Obama and Treasury Sec. Timothy GeithnerPresident Obama and Treasury Sec. Timothy Geithner

In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of