May 15,2007

Sen. Grassley Introduces the Hedge Fund Registration Act of 2007

WASHINGTON — Sen. Chuck Grassley today introduced legislation that would require hedge funds to register with the Securities and Exchange Commission.

“The goal of my initiative is to make our financial markets more transparent,” he said. “Openness is key to trust in those markets.”

Grassley said Congress needs to act because the D.C. Circuit Court of Appeals last year overturned a regulation imposed by the Securities and Exchange Commission requiring hedge funds to register. The federal courts said the Securities and Exchange was going beyond its statutory authority.

“My bill – the Hedge Fund Registration Act – would enable the Securities and Exchange Commission to do what it was already trying to do,” Grassley said. “The bill gives members of Congress the opportunity to say there should be greater transparency with hedge funds.”

Some estimates say that hedge funds today control over $1.2 trillion in assets.

Grassley has been making the case for greater transparency requirements for hedge funds since last year, following passage of the Pension Protection Act of 2006.

“I worked very hard for passage of these new pension protections,” he said. “Now I want to make sure that what Congress achieved with my pension legislation isn’t undone by hedge fund secrecy. A lot of pension holders are in the dark about their exposure to hedge fund losses because transparency is so inadequate.”

Grassley surveyed federal agencies about hedge fund transparency last October. Earlier this year, he joined in requesting a review by the Government Accountability Office of the scope of public and private pension plan investments in hedge funds and what returns and risks are likely for worker retirement funds. In March, Grassley filed legislation similar to the legislation introduced today as an amendment to S.4, the 9-11 homeland security legislation.

Grassley also has been conducting a review of how the Securities and Exchange Commission handled allegations of misconduct by agency regulators investigating a hedge fund.

A copy of the Hedge Fund Registration Act is attached to this message in a pdf. Here is the text of Grassley’s floor statement on the legislation.