Monday, October 2, 2006

US House passes bill to study hedge fund oversight 

More regulation in a heavily regulated industry is usually not the answer, but the SEC and Congress keep trying to regulate the hedge fund industry. The SEC's original attempt was based on a number of seriously flawed premises and now that it has been rejected by the courts, Congress is putting its figurative toe in the hedge fund waters.

The House has passed a bill to conduct a study of hedge funds, and the industry is waiting to see if the Senate passes a similar bill. We can only hope that Congress' study is more detailed and accurate than the "study" performed by the SEC which was sharply criticized.

Can we also hope that the study includes a study of the SEC's ability to perform any regulatory oversight that may arise? Adding more power and responsibility to an overburdened, understaffed and underfunded government agency will not benefit anyone. In fact, taking such a course may hurt the very investors Congress is attempting to protect.

Our commentary on the issue is at SECLaw.com, Registration of Hedge Fund Managers - Bureaucracy Without Benefit.
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