Connecticut A.G. Calls for Strict Hedge Fund Regulation

The State Attorney General of Connecticut, Richard Blumenthal, believes greater regulation of the hedge fund industry is a must and that state authorities could help the Securities and Exchange Commission, according to Financial News Online.

Blumenthal said that all states, including Connecticut, could "supplement and backstop an SEC that is overburdened with enforcement and regulatory responsibilities."

A new hedge fund task force will be making recommendations on both state and federal regulation, he added. The Connecticut task force may take on the responsibilities of looking at disclosure requirements, conflicts of interest, government enforcement, fraud penalties and auditing requirements.

But many in the investment management industry do not think merely requiring hedge funds to register with the SEC will deter fraud. In fact, they fear it will overburden the SEC. A New York fixed-income manager commented, "Although the registration rule has been passed, the SEC should prepare for a potentially crippling amount of legwork in enforcing it. They don't even know where lots of these hedge funds that they are seeking to regulate are based. It is going to require a significant commitment of resources."

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.