The Securities and Exchange Commission is considering shifting some of its responsibilities to the states as the agency expects a surge of up to 15% in the number of investment advisors it oversees following Tuesday’s passage of hedge fund registration requirements, Dow Jones reports.
The SEC voted 3-2 in favor of requiring hedge funds of more than $25 million in assets to register with the Commission in order to allow it to collect more information on the growing investment product as well as have examination authority in that industry. Hedge funds are required to come into compliance as of February 2006. One of the arguments against regulation of the product is that it would stretch the resources of an already overextended SEC staff.

Paul Roye, the director of the SEC’s division of investment management, said the Commission estimates that 40% of hedge funds advisors are already voluntarily registered with the Commission, but that under the new rules, 8% to 15% more could come under the SEC’s jurisdiction. Roye said the Commission anticipates being able to handle an increase within that estimated range, but anything greater and the SEC has the authority to send some of the workload to the states if necessary. The uncertainty, however, comes from the fact that the information available about the hedge fund industry to date is sketchy and estimates are not necessarily reliable.

States are currently responsible for regulating advisors with less than $25 million in assets under management. However, if need be, Roye said the Commission could up that amount, possibly to $40 million or so, to provide some relief to the SEC.

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.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.