WASHINGTON, July 14 (UPI) -- The U.S. Securities and Exchange Commission Wednesday voted to seek comments on a plan that would increase its oversight of hedge funds.
The proposal would require SEC registration by advisers to hedge funds, which are lightly regulated investment pools intended for wealthy individuals and institutional investors.
SEC Chairman William Donaldson and two Democrats on the SEC supported the idea. Two Republican commissioners, Cynthia Glassman and Paul Atkins, opposed it.
The SEC said it will seek comments on the plan for 60 days. Final adoption of the proposal requires a second vote by the five-member commission.
Donaldson said the $850 billion hedge-fund industry is too large to escape oversight by the SEC, and he defended the proposal for enhanced regulation from critics, including fellow Republicans on the SEC.
The proposal won't force hedge funds themselves to register, as mutual funds must do, Mr. Donaldson noted. Instead, the SEC would require advisers who manage $25 million or more of hedge fund assets to register with the SEC.
Hedge-fund advisers now may avoid federal registration if they don't advertise and have fewer than 15 clients, counting hedge funds as a single client. The SEC is proposing to change that by requiring advisers to count each investor in the hedge fund as a separate client.
