{"id":4440,"date":"2006-05-18T00:00:00","date_gmt":"2006-05-18T00:00:00","guid":{"rendered":""},"modified":"-0001-11-30T00:00:00","modified_gmt":"-0001-11-30T04:00:00","slug":"market-discipline-better-than-tighter-regulations-for-hedge-funds","status":"publish","type":"post","link":"https:\/\/hedgeco.net\/news\/05\/2006\/market-discipline-better-than-tighter-regulations-for-hedge-funds.html","title":{"rendered":"Market Discipline Better Than Tighter Regulations for Hedge Funds"},"content":{"rendered":"

WEST PALM BEACH, FL (HEDGECO.NET) – Ben Bernanke, US<\/span> Federal Reserve chairman, said allowing hedge funds and trading partners to manage risk and impose discipline in the sector made \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201ceconomic sense\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d, expressing scepticism about proposals to give regulators more oversight. Bank relationships with hedge funds have been the subject of recent industry efforts at self-regulation, showing improvements in the financial world\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s handle on market and credit risk, but operational risks could result from the rapid rise in the use of credit derivatives and other financial innovations could, under the wrong circumstances, spiral out of control.<\/p>\n

\n

\u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cThe primary mechanism for regulating excessive leverage and other aspects of risk-taking in a market economy is the discipline provided by creditors, counterparties and investors,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d said Mr Bernanke, who was speaking at a Sea Island, Georgia conference sponsored by the Federal Reserve Bank of Atlanta. <\/p>\n

He expressed scepticism over proposals to create a database that would contain information on hedge-fund positions and portfolios to improve monitoring of potential risks. He said prime brokers, which provide a wide range of services to hedge funds including leverage, must be fully aware of the risks involved in their dealings with hedge funds. The divergent comments of bank officials signal the varied perceptions of hedge funds and the difficulties of setting a global standard of oversight. <\/p>\n

Charlie McCreevy, the EU<\/span> Internal Markets Commissioner, also ruled out introducing new regulations for hedge funds earlier this month, telling a European committee that they played a central role in putting the \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cfear of God\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d in company management. He said \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cMy own view on hedge funds is I don\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2t see a compelling case for specific EU legislation\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u00a6 In the main, hedge funds are a catalyst for change.\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d <\/p>\n

Under the SEC<\/span> rule, most hedge fund managers now must register with the agency. That opens the funds\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2 books to SEC<\/span> examiners and makes them subject to an array of regulations including accounting and disclosure requirements. The examiners will be able to conduct inspection \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201csweeps\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d of hedge funds, and under the Patriot Act, investment companies, including private investment funds, are subject to enhanced scrutiny, including a study on the potential use of investment companies for laundering money and mandating recommendations as to whether the reporting requirements of the Bank Secrecy Act, (the BSA<\/span>), should be applied to investment companies and hedge funds. <\/p>\n

The Treasury Department will monitor and examine the trillion-dollar industry, Randy Quarles, the undersecretary for domestic finance said. \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cWhile hedge funds provide certain benefits to the financial markets, they can also put stresses on it that need attention,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d Quarles testified. <\/p>\n

Quarles said the department will examine the hedge fund industry \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cwith a view to evaluating whether the growth of hedge funds \u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u00a6 (holds) the potential to change the overall level or nature of risk in our markets and financial institutions.\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d He said later, however, that the regulators didn\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2t plan new regulations for the industry. <\/p>\n

\u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cOn the basis of what we\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2ve seen so far I wouldn\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2t say there\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s any inclination on our part for further regulation,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d Quarles said in an interview on the CNBC<\/span> cable TV. <\/p>\n<\/div>\n

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net<\/p>\n

HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds!<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

WEST PALM BEACH, FL (HEDGECO.NET) – Ben Bernanke, US Federal Reserve chairman, said allowing hedge funds and trading partners to manage risk and impose discipline in the sector made \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201ceconomic sense\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d, expressing scepticism about proposals to give regulators more oversight. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-4440","post","type-post","status-publish","format-standard","hentry","category-hedgeco-news"],"_links":{"self":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/4440","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=4440"}],"version-history":[{"count":0,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/4440\/revisions"}],"wp:attachment":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=4440"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=4440"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=4440"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}