Hedge funds have gotten too big to leave only to their managers say two U.S. Senators who have sponsored a bill that will require all hedge funds to file annual disclosures with the Securities and Exchange Commission. Under the act, hedge funds would have to keep regulators informed as to their market moves as well as cooperate with any potential investigations.
The Hedge Fund Transparency Act, sponsored by Senators Carl Levin (D-MI) and Chuck Grassley (R-IA), would bring about a new era of transparency for the trillion-dollar financial sector. “A major cause of the current crisis is a lack of transparency,” said Grassley. “The wizards on Wall Street figured out a million clever ways to avoid the transparency sought by the securities regulations adopted during the 1930s.”
Levin echoed these concerns: “The problem is that hedge funds have gotten so big and are so entrenched in U.S. financial markets that their actions can now significantly impact market prices, damage other market participants and can even endanger the U.S. financial system and economy as a whole.”
The two senators’ registration bill has been informally supported by other influential regulatory figures, including Treasury secretary Tim Geithner and SEC chairman Mary Schapiro, both of whom have called for reforms to the hedge fund market.