The Managed Funds Association has announced its support for mandatory registration with the Securities and Exchange Commission of investment advisers, including advisers to private pool
The Managed Funds Association has announced its support for mandatory registration with the Securities and Exchange Commission of investment advisers, including advisers to private pools of capital under the Investment Advisers Act of 1940.
The MFA was giving testimony before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises hearing, ‘Perspectives on Hedge Fund Registration’.
Richard H. Baker, MFA president and chief executive (pictured), said: ‘Though hedge funds were not the cause of the ongoing problems in our financial markets and our economy, MFA and our members share the commitment of policy makers to enact measures that will help restore stability to our markets, strengthen financial institutions and restore investor confidence. We believe supporting mandatory registration for investment advisers is just one of the many important steps that can be taken towards these mutually shared goals.
‘This proposed framework goes beyond that recently called for by Treasury Secretary Geithner. The Administration’s proposal called for only the largest fund advisers to be registered for the purpose of assessing their systemic relevance. The registration regime we are supporting today, which has been driven largely by changes in markets and the growing demands of investors, is more comprehensive and will subject the vast majority of investment advisers, including the largest and those considered most systemically relevant, to the SEC’s registration requirements.’
Baker’s testimony stressed that while hedge funds are important to the capital markets and the financial system, the relatively small size and scope of the industry, with approximately USD1.5trn in assets under management, did not pose significant systemic risk. He also stressed that hedge funds are substantially less leveraged than banks, have outperformed the overall market and have not sought any federal assistance.
Baker indicated that to fulfill these additional responsibilities, without diminishing the agency’s ability to meet its core mission of investor protection, the SEC would need additional resources specifically for personnel, technology and training and recruitment.
‘A registration framework that overwhelms the resources, technology and capabilities of regulators will not achieve the intended objective, and will greatly impair the ability of the regulator to fulfill their existing responsibilities, as well as their new responsibilities,’ he said.
In addition to supporting registration, MFA’s written testimony outlined several key principles that they believe Congress, the Administration and other policy makers should consider as they discuss changes to the financial regulatory system.
