Thursday, June 29, 2006

Hedge Funds as Political Football

The role of hedge funds in the securities markets is garnering greater attention because the vast ($2+ trillion) amount of money they manage means that any problems in the industry will be felt widely in the economy, at least in the short term.  A recent decision by the D.C. Circuit blocking an SEC rule requiring the funds to register and disclose information only seems to add to their mysterious power. Once there is media attention, that ensures Capitol Hill will jump in front of the cameras, as shown by the "eclectic" hearing held by the Senate Judiciary Committee on June 28 entitled "Hedge Funds and Independent Analysts: How Independent Are Their Relationships?"  That title is about as inscrutable as some of my blog posts, and the hearing included testimony from a Department of Justice representative touting the virtues of the corporate fraud task force (statement here), a disgruntled former SEC Enforcement Division attorney complaining about being taken off an insider-trading investigation of a hedge fund because of political pressure (statement here), and a representative from the "Managed Funds Association" (statement here) -- i.e. the hedge fund industry's DC lobbying arm -- touting the benefits of shorting stocks.  Demonstrating how important the issue is on Capitol Hill, the Wall Street Journal Law Blog notes (here) that there is even a turf battled between the Senate Judiciary and Banking Committees as to which one is the appropriate group to conduct this important investigation.  Sounds like the Committees are having a hard time sharing their toys again. (ph)

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Investigations, Securities | Permalink

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