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US SEC member presses for hedge fund supervision

Date: Wednesday, January 28, 2009
Author: Guardian.co.uk

The U.S. Congress should give the Securities and Exchange Commission authority to regulate hedge fund advisors and derivatives, SEC Commissioner Luis Aguilar said in a speech made available on Tuesday.

Aguilar, one of the five SEC commissioners who makes decisions on federal securities rules, said Congress should also ensure that the SEC had the jurisdiction to provide for municipal securities disclosure.
"I urge Congress to close the glaring loopholes in securities regulation," Aguilar said told the Investment Company Institute's board of governor's meeting on Monday.
Aguilar, one of the Democratic commissioners, joins the growing chorus calling for more oversight of the loosely regulated $1.4 trillion hedge fund industry.
The SEC's new chairman, Mary Schapiro, has said she was supportive of requiring hedge funds to register with the SEC.
President Barack Obama's Treasury Secretary Timothy Geithner said he supported having a registration requirement because greater information and better disclosure were needed in the market place.
Congress and the White House are getting ready to reform the country's regulatory structure after a year in which U.S. markets lost trillions of dollars and investors lost confidence in Wall Street and its regulators.
Aguilar urged Congress to strengthen the SEC, whose effectiveness is being questioned in the wake of Bernard Madoff's alleged $50 billion fraud.
Aguilar said laws needed to be amended to provide that all products that can function as securities, or economically substitute for securities, be regulated as such.
"Currently, the SEC is prohibited from exerting jurisdiction over particular financial instruments that seem to fall squarely within the agency's mission," Aguilar said.
Some have suggested merging the SEC with the Commodity Futures Trading Commission (CFTC) as many products fall in a regulatory no-man's land. Aguilar said an SEC-CFTC merger would answer which agency regulates certain financial products and markets but would not address how they are regulated. (Reporting by Rachelle Younglai)