No, not an FT Alphaville advertising ploy (though you should contact us if you’re interested) but the advent of hedge fund registration in the US.
Finalternatives reports:
Less than a week into his administration, the outlines of President Barack Obama’s plan to overhaul America’s financial regulatory systems are coming into focus. And it is becoming increasingly clear that the plan will involve some sort of mandatory hedge fund registration and surveillance.
Although most of his top economic advisers are still awaiting confirmation by the Senate-including Treasury Secretary-designate Timothy Geithner and Securities and Exchange Commission Chairman-designate Mary Schapiro-Obama is expected to offer details of his plans before traveling to London on April 2 for a Group of 20 meeting. The Obama administration is also laboring under an April 30 deadline-set by last year’s Emergency Economic Stabilization Act-to offer his regulatory recommendations to Congress.
One clear break with the previous administration of George W. Bush is over hedge fund registration. Obama and his point men on the issue appear to favor it, while the Bush White House sought to discourage it. Former Treasury Secretary John Snow, for one, criticized then-SEC Chairman William Donaldson for siding with Democrats to push through a hedge fund registration rule-later invalidated by the courts-against the pleas of his fellow Republicans.
Requiring hedge funds to register with the SEC being a stab at greater oversight, transparency and the avoidance of Madoff-ish repeats. It’s not really a surprise given Obama’s rather negative stance on hedge funds thus far, but it does beg the question — does it really matter anymore?
In fact, Reuters is running an article today with the headline “Has the moment for greater UK hedge fund regulation passed?” — a question that could easily be applicable to the US as well. For one, the hedge fund industry as a whole is declining in assets and importance. For seconds, SEC registration doesn’t necessarily guarantee authenticity or results. Clusterstock pointed that out in relation to the Madoff scandal last month:
We’ve no doubt that the Bernie Madoff fiasco will increase calls for closer oversight of the hedge fund industry… Except it’s worth pointing out that Madoff didn’t run one of these much-maligned, unregistered hedge funds. He was registered with the SEC. Here’s his latest 13-F, which looks perfectly normal.
What protections did Madoff clients get from that? Apparently, nada. Despite the fact that Madoff has been under suspicion for years, the SEC didn’t do anything until the firm came clean itself.
If anything, the fact that Madoff was registered with the SEC might’ve made clients more willing to place their money with him. Yeah, he’s a little shady, but he’s SEC-registered.
For what it’s worth, here’s an FT Alphaville knock-up of the forthcoming registration form.
Related links:
Hedge funds: Yes we can! – FT Alphaville
Hedge funds prepare for legal crackdown – FT