Hedge Funds Have Lobbied Lawmakers to Disrupt New SEC Rules

Market News Daily - Hedge Funds Have Lobbied Lawmakers to Disrupt New SEC Rules.
Market News Daily – Hedge Funds Have Lobbied Lawmakers to Disrupt New SEC Rules.

Representatives of private equity firms, venture capitals, and hedge funds have lobbied lawmakers to disrupt new proposed SEC rules, reports WSJ.

In July, the SEC finalized new transparency regulations meant to shed light on the U.S money market fund industry.

“The amendments will revise the primary rule that governs money market funds to remove the ability for a fund board to temporarily suspend redemptions if the fund’s liquidity falls below a threshold.

These money market funds will be required to provide daily disclosure of the percentage of its total assets invested in weekly liquid assets (as well as daily assets) on their website to provide transparency to investors and “increase market discipling”.

Private-equity and hedge funds are bracing for what could be the biggest regulatory challenge in years to their business of managing money for deep-pocketed investors, says WSJ.

The Securities and Exchange Commission is preparing to adopt a rule package as soon as this month aiming to bring greater transparency and competition to the multitrillion- dollar private-funds industry, people familiar with the matter said.

SEC Chair Gary Gensler has said he hopes to bring down fees and expenses that cost hundreds of billions of dollars a year.

“Since the agency first proposed new rules for the industry last year, representatives of private equity, hedge funds and venture capital have met frequently with SEC officials to try to dissuade them, SEC meeting logs show.

They have lobbied lawmakers to push back against the SEC’s plans and formed a group to fight the final rules, which could differ from the proposal.”

“Investors need increased transparency, more informative and useful data, and prohibitions on abusive and conflicted practices,” Sen. Elizabeth Warren and seven other Democratic senators wrote in a May 15 letter urging Gensler to complete the rules.

Also Read: A New Bill is Being Introduced to Fire Gary Gensler

SEC Approves New Plan to Root Out Conflicts of Interest on Wall Street

Market News Daily - Hedge Funds Have Lobbied Lawmakers to Disrupt New SEC Rules.
Market News Daily – Hedge Funds Have Lobbied Lawmakers to Disrupt New SEC Rules.

Last week, the SEC has approved a new plan to root out conflicts of interest on Wall Street related to financial firms and the adoption of technology.

Retail investors have argued for years now that technology on Wall Street, such as high frequency trading, or HFT, plays a big role in manipulating the markets as it becomes a gateway for spoofing orders.

Spoofing is a market abuse behavior where a trader moves the price of a security up or down by placing a large buy or sell order with no intention of executing it which creates the impression of market interest in that security.

The US Securities and Exchange Commission approved a plan on Wednesday to root out what Chair Gary Gensler has said are conflicts of interest that can arise when financial firms adopt the technologies, per Bloomberg.

The agency also adopted final rules requiring companies to disclose serious cybersecurity incidents within four business days after they’re deemed significant.

While the SEC is not primarily focused on the controversial practice of high frequency trading and its technology, it is looking at AI as another possible threat to the average investor.

Companies would need to assess whether their use of predictive data analytics or AI poses conflicts of interest, and then eliminate those conflicts, according to an SEC release. 

“These rules would help protect investors from conflicts of interest and require that regardless of the technology used, firms meet their obligations” to put clients first, Gensler said during the meeting.

“This is more than just disclosure. It’s about whether there’s built into these predictive data analytics something that’s optimizing in our interest or something that’s optimizing” to benefit financial firms, he said.

Also Read: 15 Congress Members Have Now Requested MMTLP Update from SEC

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Market News Today - Hedge Funds Have Lobbied Lawmakers to Disrupt New SEC Rules.
Market News Today – Hedge Funds Have Lobbied Lawmakers to Disrupt New SEC Rules.

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