Connecticut Attorney General Says Federal Hedge Fund Regulation Proposals Fall Short

Calls For Mandatory Rules

April 15, 2008 -- "These measures leave hedge funds in a regulatory black hole.

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"This plan is one small step when giant strides are needed. The Treasury Department's proposals for greater transparency and risk disclosure must be mandatory or they are meaningless.

Skyscrapers: Photo by Michael Aston (CC)

"Non-binding best practices or voluntary guidelines are an imaginary fence -- and virtual farce: They stop nothing.

"The Treasury Department is suggesting faux regulation, creating a dangerous illusion of oversight and engendering a false sense of security. Federal officials are proposing a speed limit, but making compliance voluntary: Some will fail to comply, imperiling all. Instead of voluntary guidelines, the federal government should set specific, commonsense rules and provide for federal and state enforcement.

"I proposed such measures -- to be mandatory -- more than a year ago. The subprime meltdown has vividly demonstrated the dangers of deregulation.

"Hedge funds have become too big and too important to remain outside the rules. Suggesting hedge funds do the right thing is not enough. Through risk disclosure and risk control, we must ensure reasonable, rational regulation."

Source: Connecticut Attorney General