SEC Strengthens Disclosure Rules for $18 Trillion 'Dinosaur' Hedge Funds and Private Equity Funds

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyunjung] The U.S. Securities and Exchange Commission (SEC) is set to introduce measures to further strengthen disclosure requirements for hedge funds and private equity funds.

On the 9th (local time), The Wall Street Journal reported that the SEC plans to mandate the provision of investment information from hedge funds and private equity funds and adopt measures to prevent conflicts of interest. If the related measures pass the committee led by the Democratic Party, the SEC will seek public comments for at least two months before finalizing the regulations.

Until now, private equity and hedge fund managers have been subject to less regulatory oversight compared to mutual fund managers. However, once these measures are implemented, private equity managers will be required to issue quarterly performance reports to investors, similar to public funds. These reports must include mandatory disclosures such as fees, expenses, and manager compensation. Additionally, private equity funds will be required to undergo annual audits so that the SEC can verify asset valuation estimates.

Gary Gensler, SEC Chairman, emphasized, "This proposal reflects the growing importance of private equity funds holding assets exceeding $18 trillion," adding, "We need to improve efficiency, competition, and transparency in this sector."

While the disclosed information does not need to be submitted to the SEC or made public, private equity funds must maintain books and records to allow regulators to assess compliance with the rules. Practices that harm the public interest or prioritize the funds' interests over those of their clients will be prohibited. The Journal predicted that these measures could face opposition from large financial firms such as Blackstone and KKR. Furthermore, the SEC plans to require independent financial evaluations for buyout fund firms.

Drew Maloney, Chairman of the American Investment Council (AIC), expressed concern, stating, "We are working closely with investors to ensure they have the information needed to make the best investment decisions," and added, "New regulations are unnecessary and will not help improve pension returns or assist companies in innovating and competing in global markets."

This content was produced with the assistance of AI translation services.