Senate Bill Would Subject Hedge Funds to Oversight

Date: Thursday, January 29, 2009
Author: Christopher Stern, Bloomberg

A bill introduced by two senators today would subject hedge funds to regulation by the Securities and Exchange Commission, a requirement they said is necessary to protect investors and the U.S. financial system.

The Hedge Fund Transparency Act, sponsored by Senator Carl Levin, a Michigan Democrat, and Charles Grassley, an Iowa Republican, would require hedge funds to register with the SEC, file an annual disclosure form, comply with SEC record-keeping standards and cooperate with SEC 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 on the Senate floor when he introduced the bill.

Hedge funds lost $600 billion in 2008, more than any year previously. The $1.2 trillion industry may shed as much as $450 billion in assets, or 37 percent, through market losses and client withdrawals this year, according to Morgan Stanley analyst Huw van Steenis in London.

To contact the reporter on this story: Christopher Stern in Washington at cstern3@bloomberg.net.