Because neither Congress nor the Securities and Exchange Commission require hedge funds to register or reveal key information, Connecticut General Assembly Sen. Robert Duff (D-Norwalk) vows to reintroduce as many as three bills that would require them to reveal conflicts of interest, be licensed and disclose financial information to prospective investors.

Last May, the main bill, “No. 953, An Act Concerning Hedge Funds,” passed the Connecticut Senate by a vote of 24 to 12 along partisan lines but died in the House. Likewise, a bill introduced in the U.S. Senate by Sen. Christopher Dodd (D-CT), also stalled.

Duff, chairman of Connecticut’s banking committee and an advocate of hedge fund regulation for the past four years, says the inaction in Washington behooves the state legislature to revisit the issue. A hearing is scheduled for Thursday.

This time, however, Duff vows to expand the bill beyond disclosure of conflicts of interest between a manager and an investor to include further information on investment strategies and fees. “I’ve had a lot of people inside the industry tell me that I was right on with this bill,” Duff said. “Even in their opinion, we could go further.”

Indeed, Connecticut Attorney General Richard Blumenthal has long called for further hedge fund oversight, saying they exist in “a regulatory black hole. Non-binding best practices or voluntary guidelines are an imaginary fence—and virtual farce: They stop nothing,” Blumenthal said. “The Treasury Department is suggesting faux regulation, creating a dangerous illusion of oversight and engendering a false sense of security. Federal officials are proposing a speed limit, but making compliance voluntary: Some will fail to comply, imperiling all.”

With more than 200 hedge funds headquartered in the Constitution State, Connecticut has the largest number of hedge funds in the nation. Of course, being such a large source of tax revenue makes their lobby all the more powerful, and many Connecticut attorneys and hedge fund executives are vociferously arguing against a state or federal bill.

The Connecticut Hedge Fund Association maintains the proposed bills would duplicate federal securities law as well as information already available in prospectuses. And lobbyists suggest empowering the state banking department to oversee hedge funds valued up to $100 million, up from the current $25 million.

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