A Connecticut legislator backed down on attempts to regulate hedge funds by requiring disclosure, settling on an anti-fraud task force instead.
State Rep. John Stripp introduced last week a new bill focused on targeting fraud. It passed the state’s joint Banks Committee and awaits House of Representatives action.
The news is seen as a win for hedge fund interests who adamantly opposed the original legislation that called for disclosure. Interest groups also threatened that such legislation would encourage hedge funds to leave the state.
“The hedge funds that have collapsed did so because of fraud,” Stripp told Securities Investment News. “So it makes sense that fraud is the thing you have to be worried about. States really shouldn’t regulate [hedge funds].”
The old bill would have required certain state-based hedge fund managers to disclose portfolio holdings and other fund information to institutional investors if they receive more than 10 percent of their assets from non-qualified or small investors, SIN reported.
The legislation comes as hedge funds are facing increasing calls for disclosure and regulation from some government officials across the country. Hedge funds generally are subject to less regulation than other funds.