Hedge Funds Could Face Double Exposure

Hedge funds could face double exposure reports Bloomberg. “When hedge funds and private-equity funds begin to reveal their inner workings to U.S. regulators, they may have to do it under different systems for two agencies.”

Hedge Fund Disclosure Laws

There are two issues at work. The first is the Dodd-Frank laws.  These are a series of laws that are designed to forestall another financial collapse by preventing credit crises. The purpose of these laws as they relate to hedge funds to to help the federal government systematically determine the level of risk. The SEC voted unanimously earlier this week to pass such guidelines. The second issue relates to the Commodity Futures Trading Commission. The CFTC is considering instituting a similar rule to that approved by the SEC. If approved, there will be two different government organizations asking roughly the same thing of each hedge fund, but doing so in different ways.

Cliff Rossi Says ‘Some Reporting is Not Necessarily a Bad Thing’

Cliff Rossi jokes that “This is a perfect example of government at its finest, where you’ve got two agencies asking the same company the same questions in two different ways,” but he also notes that, “some reporting is not necessarily a bad thing for [hedge funds].” Rossi was the chief risk officer at Citigroup’s consumer lending office and is now the executive-in-residence at the Robert H. Smith School of Business at the University of Maryland. The SEC rule only applies to hedge funds with more than$1.5 billion in assets and private equity funds with $2 million in assets. Larger hedge funds would be required to file quarterly statements with the SEC. The CFTC is expected to vote within the next couple weeks. Many hedge fund managers, like BlackRock’s Larry Fink, are protesting the “double exposure” arguing that two different formats will make administration difficult. Fink submitted a list of inconsistencies between the SEC’s requirements and the CFTC’s in support of his claim.