A Glimpse of the Future - Hedge Fund Study Bill Received in Senate

Congress is looking at a Hedge Fund Study Act. Currently the bill (HR 6079) has been passed by the House and received by the Senate. To become law it would have to be passed by the Republican Senate during the current post-election congressional session.

Given the need for Republican support passage does not seem assured. However, the bill was introduced by Rep. Barney Franks who is expected to become Chairman of the House Financial Services Committee in the 110^th Congress so it is in all likelihood at least a glimpse of things to come.

The areas which would be studied are:

(1) the changing nature of hedge funds and what characteristics define a hedge fund;

(2) the growth of hedge funds within financial markets;

(3) the growth of pension funds investing in hedge funds;

(4) whether hedge fund investors are able to protect themselves adequately from the risk associated with their investments;

(5) whether hedge fund leverage is effectively constrained;

(6) the potential risks hedge fund pose to financial markets or to investors;

(7) various international approaches to the regulation of hedge funds; and

(8) the benefits of the hedge fund industry to the economy and the markets.

A report would be issued not later than 180 days after enactment as to:

(1) any proposed legislation relating to appropriate disclosure requirements for hedge funds;

(2) the type of information hedge funds should disclose to regulators and to the public;

(3) any efforts the hedge fund industry or regulators of financial institutions should undertake to improve practices or provide examples of successful industry initiatives; and

(4) any oversight responsibilities that members of the President's Working Group should have over the hedge fund industry, and the degree and scope of such oversight.