Biggest Hedge Funds to Open Secrets to Regulators in 2012

Wednesday, 26 Oct 2011 03:29 PM

 

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The U.S. Securities and Exchange Commission responded to objections from hedge funds and private- equity funds by dialing back demands in its new rule calling for fund advisers to report internal information to regulators.

Revising its proposal from January -- approved in a unanimous vote today -- the agency eased thresholds for defining which large funds will have to report the most information starting next year. It also allows private-equity funds to report less often than initially proposed.

In today’s rule, required by the Dodd-Frank regulatory overhaul, all funds with more than $150 million in assets will be required to report asset and operational information that has not been collected by regulators in the past.

“We have produced a document that will address the dramatic lack of private fund information available to regulators today while easing the burden on private-fund managers producing the data,” SEC Chairman Mary Schapiro said before the vote.

The new rule defines large funds as hedge funds with more than $1.5 billion in assets, private-equity funds with $2 billion in assets, and liquidity funds with $1 billion. Those designated as large funds would have the highest reporting standards.

Under the new definitions, about 230 U.S.-based hedge funds and 155 private-equity fund advisers would be subject to the large-fund disclosure system. Hedge fund advisers will have to file the new Form PF every quarter.

CFTC Coordination

The Dodd-Frank Act called for the SEC to work together with the Commodity Futures Trading Commission to monitor the confidential fund data. The data gathered by the two agencies will be shared with the new Financial Stability Oversight Council and the Treasury Department’s financial research office as they monitor potential shocks to the markets.

Hedge funds had asked the SEC to give them more time than the initially proposed 15 days from the close of each quarter, and the new rule expands that window to 60 days.

The final rule gives private-equity funds 120 days from the end of each fiscal year to file the reports, because “trends emerge more slowly in private-equity investing,” Schapiro said.

The largest funds -- those controlling more than $5 billion -- will have to start reporting at the close of their first fiscal quarter or fiscal year after June 15, 2012. The rest will have more breathing room, with a requirement they report after the close of the first fiscal quarter or fiscal year after Dec. 15, 2012.

A related Dodd-Frank rule, passed by the SEC in June, already requires private-fund advisers to register with their regulator, reporting basic operational and structural information. That information will be made public.

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