Hedge funds, other private funds and their advisers will have to provide increased reporting to regulators under rule changes adopted Thursday by the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission.
The regulators said are intended to enhance investor protection and boost oversight of systemic risk by the U.S. Financial Stability Oversight Council (FSOC).
The revisions alter how large hedge fund advisers report various exposures (including investment, borrowing, currency and counterparty exposure), risk metrics, investment performance and portfolio liquidity, and other metrics, which the regulators said will “provide better insight into the operations and strategies of these funds and their advisers and improve data quality and comparability.”
Additionally, the changes will require private funds and their advisers to disclose more information in areas including assets under management, inflows and outflows, borrowings, and fund performance.
In a statement, SEC chair Gary Gensler said the changes will address gaps in the regulatory reporting requirements introduced in the wake of the financial crisis.
Since then, private funds’ assets have tripled to approximately US$26 trillion and the funds have grown increasingly interconnected, he noted.
“Today’s adoption enhances the commissions’ and FSOC’s understanding of the private fund industry as well the potential systemic risk posed by the industry and its individual participants. In addition, the adoption also furthers investor protection efforts,” Gensler said.
The new requirements will take effect one year after being published in the Federal Register.