Recommendations for Reality-Based Regulatory Reform for Hedge Funds and Other Private Pools of Capital
8 Pages Posted: 7 Feb 2010 Last revised: 11 Feb 2010
Date Written: October 21, 2009
The author contends that current legislative proposals that would require hedge fund managers to register as Investment Advisers with the SEC are necessary but insufficient. In order to protect investors and reduce systemic risk, hedge fund operations and investment strategies should be subject to many of the substantive requirements of the Investment Company Act of 1940, the law governing mutual funds. These requirements might include leverage restrictions, asset valuation controls, limitations on self-dealing and related party transaction and fiduciary duties to fund investors. The justification for continued exemption from comprehensive regulation is based upon false premises, including the myth that only “sophisticated investors” have capital at risk through hedge funds. Taub dispels these “myths” and recommends reality-based regulatory reform.
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