Recent statements by the Chairman of the SEC and members of the US House Financial Services Committee indicate that they may consider stricter regulations for private funds than those proposed in the Obama plan. The plan recommends that advisers to hedge funds, private equity funds, venture capital funds and other private pools of capital, whose assets exceed a certain threshold, should be required to register with the SEC under the Advisers Act.
SEC Chairman Mary Schapiro stated that, in addition to supporting the registration of fund advisers as recommended by the Obama plan, the SEC is also considering whether to require hedge funds, private equity funds, venture capital funds and other private pools of capital themselves to register with the SEC. A spokesman for Rep. Barney Frank (D-Mass.), Chairman of the House Financial Services Committee, echoed Schapiro's remarks, saying that the Committee is leaning towards "giving the SEC the statutory authority to require hedge fund registration." The office of Rep. Paul Kanjorski (D-Penn.), chairman of the House Financial Services Capital Markets Subcommittee, also made similar remarks.
It is important to note that any such changes to the SEC's authority require the enactment of legislation to that effect. This will likely face resistance from industry participants. While hedge fund professionals generally are in favor of the Obama plan, they oppose the more stringent requirements being considered by the SEC and the House Committee. For example, the Alternative Investment Management Association ("AIMA") welcomed the Obama plan; however, it does not support additional requirements on the underlying funds citing that the investors of such funds are sophisticated institutional investors who seek flexibility in their investments and do not need extra protections. AIMA CEO Andrew Baker, told Reuters: "[w]e are quite happy to accede to regulators on the fund manager level, but are a little reticent about regulation at the product level."
Related Story: Despite Obama Plan, Schapiro Maintains Idea of Hedge Fund and Adviser Registration, 41 Sec. Reg. L. Rep. 11529 (June 22, 2009)
Press Release: AIMA Supports US Regulatory Reform Proposals (June 23, 2009)
Related Story: Hedge Funds Oppose Tougher Rules on Operations: AIMA, Reuters (June 20, 2009)