Reuters – Two Senate Republicans on Tuesday questioned whether the U.S. Securities and Exchange Commission had the authority to adopt a rule requiring hedge fund advisers to register with theinvestor protection agency.
Republican Mike Crapo of Idaho said at a Senate Banking subcommittee hearing that there were legitimate questions about the SEC’s authority to adopt the rule and its ability to enforce it.
“While the SEC is an independent agency, it seems to me that it shouldn’t be permitted to take the term ‘independent’ to an extreme,” Crapo said at the hearing, which was focused on the state of the $1 trillion hedge fund industry.
Crapo said he hoped the courts would invalidate the new SEC rule, which took effect in February. A hedge fund adviser sued the agency over the rule and the case is still pending before a federal appeals court in Washington, D.C.
Hedge funds primarily attract money from wealthy individuals, large financial institutions and managers of endowments. The SEC rule requires most U.S. hedge funds with more than $30 million in assets and at least 15 clients to register. That means submitting to periodic audits and keeping better records to discourage fraud.
Republican John Sununu of New Hampshire also questioned the SEC rule adopted amid controversy in 2004.
