SEC CORNER

Under the proposed updates to a Dodd-Frank-era regulatory scheme, SEC registered investment advisers will be required to disclose certain risks associated with private funds, including hedge funds, private equity funds, and liquidity funds. 

 

To ensure the integrity of the financial market and protect investors, the proposal will expand the requirements for reporting borrowing and financing arrangements by large hedge funds with assets over $500 million, and include additional information about investment exposure, market effects, and investment performance. It will require advisers to disclose investment strategies related to cryptocurrency, real estate, and litigation funding. Investment advisers will be required to report additional information regarding the value of their assets as well as to provide further information about themselves and their private funds, thereby enhancing the SEC’s ability to monitor systemic risk.

 

Proponents of the proposal, aware of the growth of the hedge fund industry, feel the proposal will assist the SEC’s visibility of investors. Detractors voiced concerns that new investors into the market would shy away, reluctant to bear the regulatory costs, leaving the large fund advisors to rule the market.