SEC Weighs Plan on Hedge Fund Regulation

The Securities and Exchange Commission is studying a plan requiring hedge funds to register with it and submit to regulation, sources close to the SEC said Thursday.

As it moves toward reining in the loosely regulated investment pools popular with financial institutions and the wealthy, the SEC also is edging toward ordering hedge funds to begin satisfying basic disclosure standards, the sources said.

The commission has been investigating the $600-billion hedge fund industry for months. SEC staff members were expected to give their findings to the commission in a few weeks.

No clear consensus has emerged among the commissioners about hedge fund regulation, with some strongly favoring new rules and others still assessing the issue, sources said.

“We’re looking at the hedge funds because they’ve grown so rapidly. We need to know the extent to which they’re becoming retail investment vehicles,” SEC Commissioner Cynthia Glassman said.

The SEC is not intent on forcing hedge funds to reveal their closely guarded trading strategies, sources said.

But it may be drawing closer to requiring the funds to register by giving the SEC basic information about themselves and to comply with certain accounting rules.

Hedge funds boast about $600 billion in assets -- small compared with the $6-trillion mutual fund business -- but growing fast.

This has been fueled by their superior performance over other investment vehicles, including mutual funds.