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Hedge Funds required to provide Uniform Data Starting in September

Date: Monday, March 1, 2010
Author: Reuters

LONDON (Reuters) Hedge fund supervisors worldwide will require hedge funds to provide uniform data across jurisdictions from September in a bid to spot broader risks more quickly, a global regulatory body said on Thursday [Feb. 25].

The International Organization of Securities Commissions (IOSCO) published a template for supervisors listing 11 types of data that hedge funds will be required to provide, including the value of their long and short positions on different assets and their borrowing levels.

"IOSCO believes that regulators should seek to develop a comparable and consistent set of data to be collected from local hedge fund managers and advisers to monitor systemic risks and prevent gaps in regulator reporting requirements," Kathleen Casey, chairman of the body's technical committee, said in a statement.

Hedge funds made heavy losses during the global financial crisis and have been accused of aggravating market volatility by short selling stocks and other practices. That sparked the introduction of short-selling curbs, which the United States reinforced on Wednesday [Feb. 24].

Policymakers say the sector is too opaque and not regulated enough although Britain's FSA said on Wednesday that hedge funds do not pose a big risk to the global financial system.

Mandatory Registration

Many hedge funds and their managers already report data but IOSCO wants this done on a consistent and global basis to make comparisons and information exchange between regulators easier.

Ms. Casey said the list of data requirements may change as different jurisdictions adopt laws to regulate hedge funds. The European Union is set to agree on regulation later this year.

The Alternative Investment Management Association, an industry body, said having the right data is critical for assessing system-wide risk and hoped that key regulators will use their experience to shape new laws on the table.

"Regulators who have developed experience and expertise of the hedge fund sector over many years are well placed to inform these debates," AIMA Chief Executive Andrew Baker said in a statement.

The list of data includes basic information such as the manager's name, number of funds and equity owners; as well as the names of auditors, custodians, recent performance, redemptions, total assets under management and the value of long and short positions in different assets.

Geographic spread, liquidity of a fund's assets, the value of borrowings, net credit counterparty risk and top 10 positions will also have to be disclosed.

Regulators like Britain's FSA already require such data but some offshore centers do not.

The Madrid-based IOSCO does not have lawmaking powers but its members, including the U.S. Securities and Exchange Commission, for which Ms. Casey is a commissioner, commit to implementing agreed guidance.

It has already backed mandatory registration of hedge funds, in line with pledges made by the G20 group of leading economies, which asked IOSCO to improve hedge fund transparency.

IOSCO members regulate more than 95% of the world's securities markets in over 100 countries with the Cayman Islands, home to most of the world's hedge funds, becoming a member last year.

By Huw Jones