The Securities and Exchange Commission has released its long-awaited report on hedge funds in which the regulator expresses concern about their unregulated status.
The report, The Implications of the Growth of Hedge Funds, recommends that hedge fund managers be required to be registered.
In its report, SEC staff identify a number of areas of concern regarding hedge funds:
- the trend toward “retailization” of hedge funds;
- the lack of commission information about hedge funds and their advisers’ activities;
- the lack of prescribed and uniform disclosure by hedge fund advisers; and
- the increased incidence of hedge fund fraud.
Many of these concerns arise from the unregulated status of hedge funds, the SEC says, and it recommends that hedge fund advisers register under the Investment Advisers Act.
“The substantial growth in hedge fund assets, and the commission’s lack of information about these investment pools, make the study released today particularly important,” said SEC chairman William Donaldson
During its investigation, SEC staff reviewed documents and information from 65 hedge fund advisers managing more than 650 different hedge funds with over US$160 billion of assets. Staff also visited hedge fund advisers and prime brokers and conducted a series of examinations of registered funds of hedge funds.
In addition, the staff met with a variety of hedge fund industry experts and observers. The commission also held a two-day Roundtable, during which a variety of experts discussed key aspects of hedge fund operations.