WEST PALM BEACH, FL (HEDGECO.NET) -The General Accounting Office [GAO] has issued its reports on hedge funds. According to the agency, the Securities and Exchange Commission will be looking into theaccounts of about 600 to 1,200 additional hedge fund managers. This examination will result from the adoption of the SEC�s new regulatory oversight of hedge fund managers.
The Securities and Exchange Commission�s Investment Management Division made this calculation. The SEC�s Chairman William Donaldson has recommended that US hedge fund managers should register with his office as investment advisers. Two members of the SEC commissioners did not support this proposal however. There is also widespread opposition from the US hedge fund industry.
The SEC has been criticized for a lack of focus in its work, if this proposal is adopted, it would bring additional pressure on an agency already struggling to meet its regulatory duties, particularly in compliance and enforcement areas. According to SEC�s Office of Compliance Inspections and examinations, the office would undoubtedly face additional demands on their time if and when hedge fund managers are asked to register.
Donaldson�s office has focused on the issue of fraud within the hedge fund industry, according to the arguments. Registering hedge funds would enable his office to detect fraud before it happens and the law would require periodic inspections of hedge fund books by members of the SEC. Fraud within the hedge fund industry is very small when compared as a ratio to the total assets managed. This argument by Donaldson�s office may not convince too many minds, because the SEC has failed to detect such large-scale fraud in Enron, Arthur Anderson or World Com.
According to published reports, Donaldson has given instructions to his agency personnel to prepare a rule on the issue. The SEC will solicit public comments on the ruling before it is adopted. Amidst growing opposition over these proposals, it remains unclear when and how such matter would be resolved.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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