Register Advisers, Not Funds: MFA |
Date: Thursday, April 2, 2009
Author: Rachelle Younglai, ThomsonReuters.com
U.S. hedge funds concerned about growing
Congressional momentum to regulate their opaque $1.2 trillion industry
said Tuesday [March 31] they could live with requiring fund advisers to
register, but not with requiring the funds themselves to be subjected
to such oversight.
The registration of fund advisers should be "more than sufficient to
get the information that a regulator would need," said Richard Baker,
chief executive of Managed Funds Association.
There is growing consensus among key U.S. policymakers and regulators
such as the Securities and Exchange Commission, the Treasury Department
and some lawmakers that hedge funds need more oversight.
In recent testimony to a Congressional panel, SEC Chairman Mary
Schapiro said the agency might ask Congress to require hedge fund
advisers—and possibly the hedge funds—to register with the SEC.
Treasury Secretary Timothy Geithner has also told Congress that hedge
fund advisers and venture capital firms should be forced to register
with the SEC.
The SEC had required hedge fund advisers to register with the agency
until the regulation was thrown out by a federal court in 2006.
Nevertheless, many of the fund advisers continued to voluntarily
register with the SEC and to comply with the relevant disclosure
requirements.
Mr. Baker said he has concerns about other issues that may arise as
part of lawmakers' plan to reform financial regulation. For example,
Mr. Baker said if a new regulatory structure set leverage or capital
ratios for hedge funds, that would "present operational issues" for the
fund industry.
"It's not just a mere inconvenience," Mr. Baker told reporters. "It's
more: Can we do what we do if we have artificial standards of conduct
established, without regard to understanding the risk profile of the
firm that is deploying the leverage or using the capital that it has?"
The group, which represents more than 1,800 U.S. hedge funds, released
its fifth version of "sound practices," modeled on recommendations from
the President's Working Group on Financial Markets.
The practices include a due diligence questionnaire for investors to
use, as well as an overall approach to risk monitoring. The group has
been working with regulators and policymakers to develop ways to
prevent systemic risk and increase investor protection.
By Rachelle Younglai
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