SEC Proposes Requiring Registration by Hedge Funds

Friday, 19 Nov 2010 03:50 PM

 

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The U.S. Securities and Exchange Commission proposed requiring hedge funds and private-equity funds to submit to inspections and new disclosure requirements, aiming to expand oversight as required by the Dodd-Frank law.

SEC commissioners voted 4-1 today to approve a preliminary rule requiring most hedge-fund managers, who currently operate with limited government scrutiny, to register with the agency.

The rules will improve what regulators know about the funds, including their size and their auditors, SEC Chairman Mary Schapiro said during a meeting at the agency’s Washington headquarters. Such information can “serve as a red flag to regulators,” she said.

Until Dodd-Frank required the new rules, the funds have been “out of sight and were unknown to financial regulators and the public,” Schapiro said.

The proposal will be subject to a comment period before the commissioners will make a final decision to adopt the rules.

SEC commissioners also agreed to exempt venture capital firms from registration requirements. The Dodd-Frank Act specified that hedge funds managing more than $150 million in assets be subject to SEC oversight while smaller funds, venture capital funds and foreign funds wouldn’t have to register.

The proposal would expand the Investment Advisers Act of 1940 to include some private funds, which would be subject to periodic inspections from SEC examiners and data reporting requirements. They would also have to hire compliance officers.

In separate votes, SEC commissioners unanimously proposed requiring security-based swap data repositories to register with the agency, as well as a rule describing how such swap transactions should be reported and publicly disseminated.

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