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WASHINGTON, March 7 (Reuters) - Legislation requiring hedge funds to register with the U.S. Securities and Exchange Commission was introduced on Wednesday by Sen. Charles Grassley, the senior Republican on the Senate Finance Committee.
The Iowa senator said it was up to Congress to act because a federal court of appeals last year overturned an SEC regulation requiring hedge funds to register with the agency.
“My amendment gives Congress a good opportunity to say there should be greater transparency with hedge funds,” Grassley said in a statement.
Hedge funds have rapidly grown in recent years and now have an estimated $1.5 trillion in total assets.
Grassley filed the legislation as an amendment to an unrelated homeland security bill now being debated by the Senate.
“The secretive way that hedge funds operate might not be an issue for the super rich who first invested in hedge funds, but today the average Joe has a stake as pension funds are invested in hedge funds,” Grassley said. “Right now a hedge fund isn’t required to report even basic information about who runs the fund.”
Hedge funds invest in ways not available to more traditional mutual funds, such as selling short and taking derivative positions, in pursuit of above-market returns.
The Bush administration last month said it saw no immediate risks with the fast-growing hedge fund industry and that market discipline and risk awareness were the best way to protect investors from any problems with the huge pools of capital.
The President’s Working Group on Financial Markets, which is led by the U.S. Treasury Department, said there was no need to impose new regulations on the hedge fund industry.
In September 2006, Amaranth Advisors LLC lost $6.4 billion on a series of bad bets in the natural gas market, prompting renewed calls for tougher regulation of hedge funds.