September 15, 2004
I am opposed to the SECs proposal to require direct oversight of hedge fund managers. While the SEC has pointed to the prevention of fraud as a principal goal of the proposed rule, the SECs own report on the hedge fund industry indicates that fraud is no more prevalent in the hedge fund industry than in other contexts. Moreover, the dissent filed by Commissioners Glassman and Atkins demonstrates that of the 40 hedge fund fraud cases cited by the SEC, only 8 would actually be affected by the proposed registration requirement. This evidence does not suggest to me that any expansion of regulation is warranted. I also do not believe that the posited benefits of mandatory registration justify the costs the rule would impose on hedge fund investors, financial markets in general or U.S. taxpayers.