SEC Tightens Rules for Hedge Funds

Hedge funds and other private funds would have to report key information to regulators under a new rule proposed by the US Securities and Exchange Commission.

The proposal, put forth yesterday, is part of the Dodd-Frank Wall Street reform law. It will provide to the newly formed Financial Stability Oversight Council more information about hedge funds and other private pools of capital to ensure their trading activities do not pose a risk to the overall financial system.

Under the proposal, large hedge funds would need to report information about asset classes, geographical concentration, leverage, and liquidity. Likewise, large private equity companies would need to respond to questions on the leverage incurred by each fund's portfolio companies.

The SEC voted unanimously to put the proposal out for public comment.

The Commodity Futures Trading Commission will consider introducing a similar proposal on Wednesday, January 26, 2011.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio