The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

Articles By Topic

By Topic: Capitol Hill

  • From Vol. 2 No.44 (Nov. 5, 2009)

    U.S. Senate Subcommittee on Securities, Insurance and Investment Holds Hearing on Dark Pools, Flash Orders, High Frequency Trading and Market Surveillance

    Dark pools, flash orders and high frequency trading have received significant regulatory attention of late.  On October 21, 2009, the SEC proposed rule changes regarding dark pools.  Dark pools are electronic networks that facilitate trading of shares outside of traditional exchanges and give certain investors the ability to trade large blocks of shares without notifying the entire market of the transaction.  The proposed rules would require a greater proportion of stock quotes to be displayed and would restrict communication between dark pools.  The overall goal of the proposed rule changes is to push more orders onto publicly displayed markets.  The SEC also has recently proposed a ban on flash orders, a practice in which certain investors are privy to a quote for a short time before others can view that quote.  See “What Are Flash Orders, and How Might Regulation Curtail the Ability of Hedge Funds Employing High-Frequency Trading Strategies to Profit from Such Orders?,” The Hedge Fund Law Report, Vol. 2, No. 32 (Aug. 12, 2009).  Finally, high frequency trading has been receiving significant attention of late, both from regulators and the press, broadly focusing on the question of whether the practice unfairly privileges traders with access to co-located computers on or near exchanges.  See “Does Europe Offer a More Hospitable Regulatory Environment for High Frequency Trading Than the United States?,” The Hedge Fund Law Report, Vol. 2, No. 39 (Oct. 1, 2009).  The recent regulatory attention on these topics was the backdrop for a hearing on October 28, 2009 hosted by the U.S. Senate Subcommittee on Securities, Insurance and Investment.  At the hearing, the Subcommittee heard testimony from regulators, industry participants and a fellow senator on, broadly, whether the current regulatory structure is up to the task of regulating the innovative, fast-evolving topics of dark pools, flash orders and high frequency trading.  The Hedge Fund Law Report attended the hearing, and this article summarizes the points discussed at the hearing of most pressing relevance for hedge funds.  Specifically, we offer significant detail on what was said, and what the tone and substance of the hearings may mean for regulatory developments in the near term with respect to dark pools, flash orders, high frequency trading and market surveillance.

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  • From Vol. 2 No.16 (Apr. 23, 2009)

    Key Players in Washington Agree that Increased Hedge Fund Regulation is Necessary, but Differ on the Shape that Regulation Should Take

    A rift has developed between the chairmen of the main House and Senate committees dealing with hedge funds and their managers, according to conversations between The Hedge Fund Law Report and key congressional staff, reviews of numerous public statements by key figures and testimony before relevant committees in recent weeks.  While those committee chairmen – Senator Christopher Dodd of Connecticut, Chairman of the Senate Banking Committee, and Representative Barney Frank of Massachusetts, Chairman of the House Committee on Financial Services – broadly agree that some form of increased regulation of hedge funds and hedge fund managers would be an appropriate political (if not economic) response to recent economic events, they differ on the direction that increased regulation should take.  Judging by the flurry of recent bills, comments and other proposals on and around Capitol Hill, the drive to change or “reform” hedge regulation is well underway.  More than a dozen Senate and House hearings directly or indirectly focusing on hedge funds have been held so far, a slew of them coming in late March and early April.  We describe the current state of play on the Hill, including the Dodd-Frank face-off, recent testimony from Treasury Secretary Timothy Geithner, the status of the bill proposed in January by Senators Grassley and Levin to require registration of hedge funds, the views of Mary Shapiro of the SEC and Richard Baker of MFA and comments from Capitol Hill observers.

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  • From Vol. 1 No.28 (Dec. 16, 2008)

    Additional Hedge Fund Regulation: What, not Whether

    Vows on Capitol Hill to increase scrutiny of hedge funds have flared and just as quickly disappeared in recent years.  But now the faltering economy, combined with Democratic dominance in the November elections and unceasing news since of devastating blows to individual and institutional investors, have produced a decidedly different climate in Washington.  In a series of interviews, hedge fund attorneys and scholars told The Hedge Fund Law Report that the discussion has moved past the inevitability of increased federal monitoring of the hedge fund industry to more specifics about some of the possible regulatory steps.  We detail the current climate on Capitol Hill with respect to hedge fund regulation.

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  • From Vol. 1 No.26 (Dec. 3, 2008)

    Be Prepared: How Hedge Fund Managers Can Get Ready to Testify Before Congress

    With what we anticipate will be increasing frequency, hedge fund managers are finding themselves summoned to that most public of forums – the witness table at Congressional hearings – the most salient example being the recent hearings conducted by the House Committee on Oversight and Government Reform at which five prominent hedge fund managers testified under oath.  (Those hearings were covered in detail in the November 25, 2008 issue of The Hedge Fund Law Report.)  In this environment, the question is no longer how to stay off the stage, but what to do and say when you’re on it – and, even more important, how to prepare for it.  We detail specific strategies that hedge fund managers can use to prepare for Congressional testimony.

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  • From Vol. 1 No.25 (Nov. 26, 2008)

    House Hearings on Hedge Funds’ Role in the Financial Crisis

    The heads of five of the most successful U.S. hedge funds testified on November 13 before the House Committee on Oversight and Government Reform.  In the course of the hearings, Committee members evidenced concern about systemic risk posed by hedge funds, and expressed interest in greater government oversight of hedge fund operations, investments and taxation.  The hearing offered a foreshadowing of heightened government scrutiny that hedge funds are likely to face when the 111th Congress convenes in January under substantially increased Democratic majorities in both houses.

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