ARANCA News Report (www.aranca.com) 
London, Wednesday, March 18, 2009 :
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EU and SEC Move A Step Closer to Hedge Fund Registration

Going by the recent press reports, both European Union (EU) and Securities and Exchange Commission (SEC) seem be to be intent on making registration of Hedge Funds mandatory for better regulatory supervision.  

In the recently concluded G20 meet, the finance ministers and central bankers from the group felt that hedge funds should be made to register in order allow regulators to supervise them. In addition, the EU proposes to publish a draft policy on remuneration in the financial sector. Sources revealed that proposed regulation would be a 'directive', which is essentially a draft law that must be adopted and ratified by member states of EU and the European Parliament.

Stung by Madoff scam and other financial irregularities committed by so-called registered investment advisers (RIAs), the SEC is proposing to step up its enforcement by independently verifying the information submitted by the RIAs. It plans to match information given by RIAs with that from independent third parties like auditors, accountants and even investors. Analysts see this a stepping stone to bring the Hedge Funds under greater regulatory supervision.

However, registered Hedge Funds are already treated as RIAs and the registration and withdrawal is voluntary. SEC has said that the new audits rules apply to registered hedge funds only. There were 1,991 hedge funds registered as investment advisers with the SEC in 2008 according to Government Accountability Office. Given that there are several unregistered funds, analysts are wondering to what extent will these moves have the desired impact.

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