Regulating Hedge Funds
Dale A. Oesterle
Ohio State University (OSU) - Michael E. Moritz College of Law
Ohio State Public Law Working Paper No. 71
Center for Interdisciplinary Law and Policy Studies Working Paper No. 47
This short piece is on the merits of government regulation of hedge funds. The article begins with background information on hedge funds and the current state of their regulation. After sifting through the various reasons advanced for regulating hedge funds, and focusing on three in particular - short selling, leverage and funds of funds, I argue that extensive direct regulation of hedge funds is unnecessary and may harm the country's trading markets. Indeed, the dramatic growth of hedge funds is in part attributable to the current overregulation of registered investment companies. We should, therefore, not tighten the regulation of hedge funds but lighten the regulation of registered investment companies. I also argue, however, that strengthening of some forms of indirect regulation of hedge fund leverage, principally limits on banks that lend to and are counterparties of hedge funds, may make sense.
Number of Pages in PDF File: 33
Keywords: SEC, Securities Act, Securities Exchange Act, Investment Company Act, Investment Advisers Act
JEL Classification: G18, G24, G28, K22
Date posted: July 10, 2006
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