Financial Regulatory Forum

By Karey Wutkowski

WASHINGTON, Sept 18 (Reuters) – U.S. hedge funds will likely have to provide “pretty detailed reporting” to regulators in the future and some public disclosure of their activities, the chairman of the U.S. Securities and Exchange Commission said on Friday. Mary Schapiro said her agency is already exploring what the requirements might look like — and how to balance competitiveness concerns — as Congress debates whether to give the SEC more power.

“We’re very aware of the tension between the need for transparency and the need for hedge funds to have an investment strategy that’s not front-run by other” investment firms, Schapiro said during a global finance conference in Washington.

The SEC is also discussing the possibility of hedge fund information being released publicly on a time-delayed basis, she said.

The Obama administration wants to require hedge fund managers, private equity managers and some venture capital funds to register with the SEC and open their books to examinations.

Schapiro also discussed reforms within her own agency.
In her eight months as chairman, Schapiro said she has sought to change the SEC culture from one focusing on the competitiveness of firms to one that emphasizes investor protection and market integrity.

The SEC’s reputation took a blow after failing to catch investment manager Bernard Madoff’s $65 billion fraud, despite multiple tips the agency received. Staff missteps and incompetencies were detailed in a scathing report recently issued by the SEC’s internal watchdog.

In defense of her agency, Schapiro said the SEC has aggressively moved to examine tougher regulations for credit rating agencies, executive compensation, and so-called flash trading on stock exchanges that give some traders a split-second advantage in the market.

“I don’t have a friend left in the world as a result,” Schapiro joked.