Hedge Fund Leverage Report Released
Study recommends better risk management and disclosure
April 12, 2000 – The Financial Stability Forum’s Working Group on Highly Leveraged Institutions posted its report in April, which gives special emphasis to large hedge funds. The Forum, which was established last year by the finance ministers and central bank governors of the G7 countries to promote international financial stability through information exchange and international co-operation in financial supervision and surveillance, has endorsed the report’s recommendations.
The report argues for better risk management and disclosure and neither endorses nor rules out direct regulation of highly leveraged institutions. The report is available online from http://www.fsforum.org/Reports/RepHLI.html
Several witnesses addressed the Forum’s report or H.R. 2924, the proposed Hedge Fund Disclosure Act, at yesterday’s House Banking Committee hearing on recommendations by the President’s Working Group on Financial Markets. H.R. 2924, which is perceived as being consistent with the Forum’s report, was supported by most witnesses; the major exception was George Crapple, Chairman of the Managed Funds Association, who argued strongly against the proposed legislation. Annette Nazareth, Director of the SEC‘s Division of Market Regulation, indicated that SEC staff have been working on proposed guidance that would require public companies to disclose exposures to hedge funds and other highly leveraged institutions that are material to their financial statements or could have a material effect on their financial statements as a result of possible future losses.
In addition, Robert Paul, General Counsel of the CFTC, said that CFTC staff have drafted a proposed Rule 4.27 that would parallel the requirements of H.R. 2924 for operators of the largest commodity pools. The witness statements are available online at http://www.house.gov/banking/41100wit.htm
Copyright 2000, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, http://www.egroups.com/group/fundlaw. To subscribe to FundLaw, send a blank e-mail to firstname.lastname@example.org
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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.