Bloomberg – The U.S. government is intensifying its scrutiny of hedge funds as lawmakers weigh stricter oversight of the industry with $1.2 trillion in assets under management.
The Treasury Department this month started an inquiry into the funds, whose assets doubled in the past five years, and their impact on financial markets. Treasury Undersecretary Randal Quarles, Securities and Exchange Commission Chairman Christopher Cox and Commodity Futures Trading Commission Chairman Reuben Jeffrey will testify later today on hedge funds at a hearing before the Senate Banking Committee in Washington.
SEC rules requiring hedge fund managers register and submit to random inspections were struck down by a federal appeals court last month, giving Congress more reason to consider regulation. The SEC last week called Morgan Stanley Chief Executive Officer John Mack in for questioning in a probe of insider trading at Pequot Capital Management Inc., a $7 billion hedge fund.
“There shouldn’t be a large, dark void there where there’s no knowledge on the part of the important regulators like the SEC about what’s happening,” said Senator Paul Sarbanes, a Maryland Democrat who sits on the Senate Banking Committee and co-wrote the Sarbanes-Oxley corporate-governance law in 2002. Lawmakers “need to have some sense” of what hedge funds are doing, he said in an interview.
