SEC Schedules Vote on Hedge Fund Oversight

The Securities and Exchange Commission on Tuesday scheduled an Oct. 26 vote on its proposal to open the $866-billion hedge fund industry to agency oversight for the first time.

SEC Chairman William H. Donaldson champions the plan, which would require hedge fund managers to register with the SEC and allow regular agency inspections of the private partnerships for wealthy investors. Donaldson says the largely unregulated investment pools are growing too quickly to be exempt from scrutiny.

Critics of the plan, including House Financial Services Committee Chairman Michael G. Oxley (R-Ohio) and Federal Reserve Chairman Alan Greenspan, say that hedge fund regulation may hinder the efficiency of the financial markets.

A divided SEC passed preliminary hedge fund rules in July, with Democratic Commissioners Harvey Goldschmid and Roel Campos siding with Republican Donaldson to back the plan. Republican Commissioners Paul Atkins and Cynthia Glassman opposed it.

Hedge funds including Cerberus Capital Management and Citadel Investment Group have mounted a lobbying campaign against the new rules.