Hedge Funds:

Regulation

 

Registration

Position: Hedge fund managers should meet the registration requirements of the appropriate securities regulator in the markets in which they operate.

Rationale: Equal treatment prevents abuse of regulation and its intent, and provides greater transparency, oversight, and investor protection. Registration enables regulators to regularly and more fully understand the activities of the fund manager. Notification does not interfere with the operations of other collective investment structures and managers who must register with regulator, but does alert regulatory authorities that a hedge fund manager is operating within their jurisdiction.

Where stated: SEC Hedge Fund Registration (PDF)

 

Factors Determining Regulation

Position: Regulators should “look through” to the investors of a hedge fund to determine the number of clients and assets under the manager’s care for determining whether the hedge fund manager requires more oversight.

Rationale: Artificial structures and devices should not be permitted to circumvent regulatory oversight of investment advisers.

Where stated: USAC - SEC Hedge Fund Registration (PDF); FSA DP 05/4 Hedge Funds (PDF)

 

Risk-Based Regulation

Position: A risk-based approach is an appropriate means for regulators to monitor the risks associated with hedge funds and hedge fund managers.

Rationale: An approach that combines requiring hedge fund managers to notify the regulator of their presence; and that encourages improved due diligence by brokers, lenders, and other counterparties in the interaction with hedge funds and hedge fund managers, is likely to prevent the failure of one or more hedge funds from creating systemic market failure.

Where stated: FSA DP 05/4 Hedge Funds (PDF)