U.S. financial regulators support stricter rules on disclosure of hedge fund

The Wall Street chief executive voted in favor of laws that would force hedge funds to report immediately if there is a major downturn or the removal of large corporations, in a bid to close the loopholes created by the market last year.

The directive from the Securities and Exchange Commission Wednesday is part of a new policy to strengthen the resilience of the US financial markets. The Commissioners also supported plans to secure a $ 23tn market for US government debt, which contributes to the global economy. These rules have now been released for public comment.

The fall of Archegos, the so-called family office that oversees Bill Hwang’s finances, last year forced banks across Wall Street to report a loss of more than $ 10bn when a series of big bets were used. peripheral witchcraft. While Archegos may not be subject to the new rules, hedge funds and special funds that follow the same approach would be within the revised direction, officials said.

Gary Gensler, chairman of the SEC, said a review by US officials on hedge fund reporting requirements over the past decade has found “significant gaps”. “For example, we can benefit from timely information during the fast-moving markets such as March 2020. failure in the Treasury market, ”he said.

Most hedge funds and business companies have been disclosing their services even though they have grown significantly over the past 10 years. The secrecy of securities securities has doubled from $ 5tn in 2013 to $ 11tn by the end of 2020, according to the SEC. Revenue exceeded 70 percent over the same period.

The SEC seeks to speed up the disclosure of just one day’s business if the hedge fund is severely damaged, a landline phone call, events leading to mass customer cuts, significant financial cuts or any changes in its relationship with big business – financial institutions.

Hedge funds often face cross-border financing – requiring them to offer more cash or US Treasury bonds as security for borrowing money – from their banks in the event of a market downturn or high losses.

The changes also include reducing the number of reports they provide to secretariat managers from $ 2bn to $ 1.5bn in managed services. This could ensure that the same sector of the business community was established as the reporting standard was first set in 2013, SEC officials said.

Treasury market reform follows several developments over the past decade that have tested its effectiveness stability and the amount of debt remaining in the US mushrooms.

In the last 15 years, the market has shifted from one that operates between banks and retailers to one that is overseen by the fastest-growing retailers on electronic platforms. Company bonds are also being sold more electronically and not over the phone.

The revised law aims to seize corporate or government-protected trading platforms that fall outside the SEC, by enabling them to adhere to existing standards that protect investors, promote fair and orderly markets and maintain technological instruments that support US financial markets.

The new law brings about 20 companies into security groups under the SEC, officials said. The companies could be registered with the SEC as an exchange or operating as an alternative means of sale, meaning they will register as retailers, SEC officials said.

Other platform functions like Tradeweb or MarketAxess could fall under the new definition of “exchange” issued by the SEC, officials said.

“Together, I believe these measures will enhance the resilience and accessibility of the Treasury market, which forms the basis of our major markets,” Gensler said.