The International Organization of Securities Commissions, of which the U.S. Securities and Exchange Commission and the U.K. Financial Services Authority are members, starting in September will ask hedge funds to provide high-level, bi-annual snapshots of: their stock and bond holdings, geographic and underlying currency exposure, leverage levels, sales and redemptions, investor classifications, primary marketing channels, recent performance, and operations and technology details, including turnover, clearing mechanisms and risk measures.
In addition, they will have to provide details about their business, as well as information on liquidity of assets and use of side pockets. While IOSCO doesn’t have enforcement powers, the regulators that are members agree to comply with its guidance.
The aim is to determine possible systemic risks arising from the hedge fund industry. IOSCO said participants are best monitored through their trading activities, the markets they operate in, funding, counterparty information and information on technological support.
“IOSCO believes that regulators should seek to develop a comparable and consistent set of data to be collected from local hedge fund managers and advisors to monitor systemic risks and prevent gaps in regulatory reporting requirements,” said Kathleen Casey, a commissioner a the SEC and chairman of the IOSCO Technical Committee, which drafted the template.
The Alternative Investment Management Association issued a statement welcoming the information gathering as a way to prevent potential systemic risk.