Hedge Fund Regulation Bill

Bill Proposed in House that Would Regulate Hedge Funds

A high-ranking Representative has proposed legislation that could have major consequences for the hedge fund industry. Representative Paul Kanjorski, who is the Democratic chairman of the House of Representatives capital markets subcommittee, proposed the bill which is very similar to the legislation issued by the Obama administration earlier this year.

The bill would require hedge funds and other private pools of capital with more $30 million under management to register with the Securities and Exchange Commission. The bill would also ensure that hedge funds submit reports "detailing their assets, their use of leverage, off-balance sheet and counterparty risk exposures as well as trading and investment positions and practices." The major difference is the exclusion of venture capital firms from the regulation. Hedge funds are actively lobbying against the regulation, meeting with the chairwoman of the SEC, Treasury secretary and Federal Reserve chairman.

Hedge funds found by regulators to be “so large, leveraged or interconnected that they pose a threat to financial stability” will be regulated as “Tier 1″ financial holding companies and will be subject to more stringent requirements for capital, liquidity and risk management.

The bill would require all registered hedge funds to establish a compliance program for conflicts of interest and anti-fraud prohibitions and record-keeping requirements. Mr. Kanjorski’s draft legislation comes as hedge funds are stepping up their efforts to head off new regulation from Washington. Source

Related to: Hedge Fund Regulation Bill

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