7.15.2009 Andrew Donohue, Director of the SEC’s Division of Investment Management, testified before the Subcommittee on the Securities, Insurance, and Investment of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. The Director spoke about regulating hedge funds and other private investment pools. The Director began his testimony by noting that over the past two decades, private funds, including hedge funds, had grown significantly and the securities laws had not kept pace. The Director stated that the SEC has incomplete information about the advisers and the funds that are participating in the U.S. markets, and it is not uncommon for the first contact with a manager of a significant amount of assets to be during an investigation by the SEC’s Enforcement Division.

The Director stated that the only solution to close the regulatory gap was legislative action, such as the Private Fund Transparency Act of 2009, which requires advisers of private funds to register under the Advisers Act if they have at least $30 million in assets under management. The Director stated that in addition to the registration requirement, additional regulatory gaps should be addressed by providing the SEC with tools to better protect investors and the health of the U.S. markets.

Click http://www.sec.gov/news/testimony/2009/ts071509ajd.htm to access Director Donohue’s full testimony.