SEC Chairman Backs Hedge Fund Disclosure

Hedge funds need more government scrutiny to protect less sophisticated investors, Securities and Exchange Commission Chairman William Donaldson said Thursday as the Senate began examining the $600-billion industry.

Hedge funds, which were meant for the wealthy, have drawn in more middle-class investors seeking higher rates of return during the market slump of the last several years. That has caused the SEC to review hedge funds with an eye toward increasing oversight of the largely unregulated industry, Donaldson said.

“My personal view is that we need to have more sunlight,” Donaldson said after Senate Banking Committee hearings at which senators also said hedge funds should be subject to more regulatory controls.

Donaldson told the committee that he preferred requiring hedge funds to disclose more information instead of regulating them to the point where they’re driven out of business or set up shop overseas.