After some efforts to avert the President Obama’s Administration’s plan to include them in the mass overhaul of the U.S. financial reforms, hedge funds managers and private-equity firms admitted that they can’t escape this speeding train.
The US Treasury Secretary Tim Geithner emphasized that the new rules are necessary to bring back the confidence in financial sector after the economy took a hard blow. He insisted that hedge funds and private-equities must register with the US Securities and Exchange Commission to build transparency and disclose information about their property holdings.
The hedge funds and private-equity firms will be under the stern observation of the regulatory body that would identify the vulnerable companies that are capable to bring problems in the financial system.
But Geithner clearly specified that these regulations will not cover all funds like that of banks, which adheres to certain requirements for liquidity, capital, and resiliency against potential losses.
The hedge funds are pool of private capitals whose managers can engage in different financial activities. He can buy and/or sell assets, as well as bet on rising and falling assets prices and participate in the profits from the money invested.
Geithner pointed out that, some of them may reach the size where they can operate systemically like that of banks and so must follow banks regulation, but there is no parameters laid yet at which point one hedge fund may be considered as systemic.
Once registered, all their transactions and ventures would have to be reported to SEC. They will then be regulated by systemic-risk regulator to limit their dependence on short term financing.
