Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
CNBC – The Obama administration has sent legislation to Congress that would bring hedge funds and other private pools of capital under government supervision.
The proposal calls for the Securities and Exchange Commission to oversee hedge, private equity and venture capital funds. By registering with the SEC, their books would be open to federal inspection and they would be subject to disclosure requirements to investors and creditors.
Stamford Advocate – Although it had bipartisan support, a bill requiring hedge funds operating in Connecticut to disclose conflicts of interest to investors died in the House of Representatives Wednesday, the final day of the 2009 legislative session.
"It ‘blew up’ like Amaranth, like Bayou," said state Rep. Ryan Barry, D-Manchester, who co-sponsored the proposal with Sen. Bob Duff, D-Norwalk, co-sponsored the legislation.
Barry was referring to the high-profile collapses of the Stamford-based Bayou Group LLC in 2005 and Greenwich-based Amaranth Advisors LLC in 2006, which inspired him and Duff, as Banks Committee chairmen, to pursue hedge fund regulations.
Charleston Daily Mail – The Connecticut Senate has voted to require hedge funds and private equity funds located in the state and doing business here to disclose certain conflicts of interest to customers.
Supporters of the bill, which passed on a 24-12, party-line vote, say it’s needed because Congress hasn’t done enough to protect consumers and regulate the hedge fund industry.
Sen. Robert Duff, a Norwalk Democrat, says if Congress passes similar legislation before Dec. 31, the Connecticut bill would no longer be needed.
Guardian Unlimited – A U.S. Senate bill to make the $1.3 trillion hedge fund industry more transparent would give federal regulators the authority to require fund managers to register with the Securities and Exchange Commission, one of the bill’s authors said on Monday.
Earlier this year, Republican Senator Charles Grassley and Democratic Senator Carl Levin introduced the legislation but wording in the bill sowed confusion among hedge fund advisers.
AllAfrica.com – The Financial Services Board (FSB) has begun work on legislation to control hedge funds, which played a critical role in the global economic meltdown.
FSB CEO Dube Tshidi said yesterday the aim with the legislation, a first for SA, was to limit risk and achieve greater transparency. A dedicated team was working quite fast on the project which could be finished next year.
Hedge fund managers are required only to be registered and meet certain conditions such as to be fit and proper persons, but Tshidi said it was necessary to regulate the funds themselves.
HedgeCo.Net – The "post-Madoff era" and the litigious society in which firms operate today have presented many operational risks that are beyond control. Managers are not getting paid to take those risks and the consequences can be devastating.
Regulatory investigations and private litigations are on the rise and may result in expensive legal defense and the allocation of resources away from your business.
The new administration supports increased transparency and the regulation of hedge funds. In addition, there is an immense amount of international pressure in favor of regulation. This has made it very politically attractive to support the legislation of industry regulation, which may potentially threaten your business.
But there are options.
At CBS Coverage, the Financial Institutions Risk Group is focused solely on protecting your fund, its investors, and yourself.
CBS provides an excellent added value to your hedge fund and can help increase your investor confidence and trust.
International Herald Tribune – Two senior senators have introduced legislation to impose U.S. government oversight on hedge funds.
The legislation by Senator Carl Levin, a Democrat of Michigan, and Senator Charles Grassley, a Republican of Iowa, was filed Thursday while the administration of President Barack Obama prepared a broader legislative overhaul of the regulatory system, including an effort to regulate hedge funds more tightly.
State regulators and a panel created by Congress to oversee the $700 billion Troubled Asset Relief Program issued separate but similar regulatory proposals Thursday. The proposals also seemed to mirror closely many of the provisions that administration officials say will be part of their plan.
All Headline News – Hedge funds will require registering under a new proposal to regulate the market segment that lost $600 billion in 2008 due to financial crisis, an all time record.
Under the bill by two senators today would lead to the regulation of hedge funds by the Securities and Exchange Commission, a step that is considered to protect investors and prevent the U.S. financial system from further sinking into the recession.
The Hedge Fund Transparency Act, sponsored by Senator Carl M. Levin (D-Mich.) and Charles E. Grassley (R-Iowa), was filed on Thursday amid the new administration’s initiative to overhaul some legislation of the regulatory system.
While media-shy TCI founder Chris Hohn and others will face tough questions from the Treasury Select Committee on financial stability, short-selling and other issues, it nevertheless seems that the pro-legislation lobby’s position may be weaker than it has been in recent years.
For one thing, many hedge funds simply do not have the financial clout — and therefore carry the associated risks seen by some politicians — that they once did.
Idaho State Journal – Several prominent hedge fund managers told Congress Thursday they support a new central exchange to open the murky world of some complex investments partly blamed for the global financial crisis, but stopped short of endorsing stricter regulation of hedge funds themselves.
The managers testified at a House hearing examining the role of hedge funds in the crisis, and the risks that critics say they pose to the financial system. Hedge funds, vast pools of capital holding an estimated $2.5 trillion in assets, operate mostly outside of government supervision.
Billionaire investor and liberal activist George Soros, who runs a hedge fund, said new regulations were needed to gauge the underlying financial strength of banks. But he warned against "going overboard" with regulations that could do more damage than good to the financial system.
New York Times – Several leading hedge fund managers told Congress on Thursday they support some new regulation of hedge funds and the complex derivative securities that are partly blamed for the global financial crisis.
But they advocated only the lightest supervision of their industry, and said they would be willing to disclose their secretive trading activities to regulators only with a guarantee the information would not be released to the public. One executive claimed that requiring hedge funds to publicly disclose their proprietary trading strategies would be like requiring Coca-Cola Co. to reveal to competitors its proprietary recipe for Coke.
"Proper regulation is critical, but the best regulation is created with an eye toward unleashing opportunities, not limiting possibilities," said Citadel Investment Group Chief Executive Officer Kenneth C. Griffin. "We must solve the serious issues we face but in a way that does not stifle the best innovative qualities of our financial markets."
BloggingStocks – Congress will bring in a bunch of big hedge fund managers like George Soros and ask them why they make so much money. It will also try to figure out if they control too much of the trading on Wall Street and borrow too much money from banks putting them at risk if the hedge funds default.
According to The Wall Street Journal, "Already, momentum is building to monitor hedge-fund activities more closely and curtail some trading activities, through greater regulatory oversight and lower borrowing limits, industry insiders said."
The government may be going a little too far here. For starters, hedge funds are private institutions with the exception of a couple which have gone public. To a large extent what they pay their traders is based on a formula which their customers accept. These fees are not forced on anyone. It is not an odd analogy to say that a farmer who makes $100 million because he owns 50,000 acres of corn has reaped what he deserves for his labor. But, he is not going to be in front of Congress testifying about what he made. Free enterprise has given him his reward.
