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Hedge Fund Regulation Is Necessary.

Hedge Fund Regulation Is Necessary.

ARTICLE: Protecting Global Financial Market Stability and Integrity: Strengthening SEC Regulation of Hedge Funds . BY: Thomas C. Pearson and Julia Lin Pearson.

33 N.C.J. Int’l L. & Com. Reg. 1
“proposes regulation to provide ordinary investor protection against fraud, to improve market efficiency through increased disclosure by hedge funds, and for other rules of conduct and governance for greater integrity in the market.”
“This article proposes more effective solutions involving a coordinated international approach to hedge fund regulation. The hedge fund regulations proposed in this article aim to achieve a reliably stable financial system, financial market integrity through greater transparency, and protection for all investors from fraud.”
[yes regulation, but enhancing it.]

DEVELOPMENTS IN BANKING AND FINANCIAL LAW: 2005: III. HEDGE FUND INDUSTRY . BY: David I. Silverman. 25 Ann. Rev. Banking & Fin. L. 21
“Hedge fund fraud has become a significant cause of concern for the SEC”
“Recent high profile hedge fund frauds have highlighted the need for greater regulatory involvement.”
[yes regulation]

COMMENT: Hedge Fund Regulation: What the FSA Is Doing Right and Why the SEC Should Follow the FSA’s Lead. By: Lartease Tiffith. 27 NW. J. INT’L L. & BUS. 497
“The SEC is overlooking more important concerns: market risk, liquidity risk, the lack of capital requirements, and excessive economic leverage.”
“how the near collapse of Long-Term Capital Management (“LTCM”) was the first major indication to the U.S. Securities and Exchange Commission (“SEC”) and United Kingdom’s Financial Services Authority (“FSA”) that some type of regulation of hedge funds was needed”
“it made sense that regulators such as the FSA and the SEC provided limited regulation to allow them to flourish”
[yes regulation, but limited guidance]
“despite these numerous objections to domestic hedge fund adviser regulation, and before the D.C. Circuit’s fateful ruling, much of the hedge fund industry was at peace with the fact that such regulation was unavoidable and was here to stay”
“After reviewing the matter closely the Commission concluded that hedge funds may pose a threat to investment consumers and to financial stability and attempted to act proactively and responsibly to avoid unnecessary harm to investors.”
“the Commission unanimously adopted a new antifraud rule under the Advisers Act, designed to protect investors in pooled investment vehicles.”
[yes regulation]

RECENT CASE: Administrative Law – Judicial Review of Agency Rulemaking – District of Columbia Circuit Vacates Securities and Exchange Commission’s “Hedge Fund Rule.” – Goldstein v. SEC, 451 F.3d 873 (D.C. Cir. 2006). 120 Harv. L. Rev. 1394

“because of the many forms that these funds take and their incentives to embrace secrecy and avoid regulation, legislation will almost certainly fail to anticipate future trends. Administrative regulation is a viable solution.”
[yes regulation]

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