MFA President Calls For Intelligent Regulatory System For Economy Stabilisation

In testimony before the Senate Committee on Banking, Housing and Urban Affairs hearing, Enhancing Investor Protection and Regulation of Securities Markets Part II, Managed Funds Association (MFA) outlined several important considerations that policy makers should undertake as they debate regulatory

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In testimony before the Senate Committee on Banking, Housing and Urban Affairs hearing, Enhancing Investor Protection and Regulation of Securities Markets Part II, Managed Funds Association (MFA) outlined several important considerations that policy makers should undertake as they debate regulatory reforms to restore investor confidence, stabilize the financial system and hasten economic recovery.

MFAs testimony was delivered as Treasury Secretary Timothy Geithner outlined the Obama Administrations financial regulatory reform proposals before the House Financial Services Committee.

Richard H. Baker, President and CEO of MFA stressed several principles that should be considered as Congress, the Administration and other policy makers address the issues associated with prudential regulatory reform. Those principals are:

-The goal of regulatory reform should be to develop intelligent regulation, which makes our system stronger for the benefit of businesses and investors.

-Prudential regulation should address identified risks or potential risks, and should be appropriately tailored to those risks.

-Regulators should engage in ongoing dialogue with market participants. Any rulemaking should be transparent and provide for public notice and comment by affected market participants, as well as a reasonable period of time to implement any new or modified regulatory requirements.

-Reporting requirements should provide regulators with the right information to allow them to fulfill their oversight responsibilities as well as to prevent, detect and punish fraud and manipulative conduct. Public disclosure of such information can be harmful to members of the public that may act on incomplete data, increase risk to the financial system, and harm the ability of market participants to establish and exit from investment positions in an economically viable manner.

-A prudential regulatory framework should distinguish, as appropriate, between different types of market participants and different types of investors or customers to whom services or products are marketed. Investor protection should not be limited only to retail investors, but a one-size fits all approach will not be as effective as a more tailored approach.

-Industry best practices and robust investor diligence should be encouraged and viewed as an important complement to prudential regulation.

The restoration of stability and confidence in the financial markets will require constructive, collaborative, efforts among policy makers and the private sector towards the shared interest of reestablishing a sound, stable financial system,” says Richard H. Baker.

“We believe that goal can be accomplished, in part, through pursuit of a smart financial regulatory system one which includes a systemic risk regulator as part of that framework.

Hedge funds remain a significant source of private capital and can continue to play an important role in restoring liquidity and stability to our capital markets, continues Baker. MFA is supportive of the new Public Private Partnership Investment Program. We share Secretary Geithners commitment to promote efforts that will stabilize our financial markets and strengthen our nations economy.”

MFA and its members look forward to working with Secretary Geithner, Congressional leaders, and members of President Obama’s economic team on this and other important issues in order to achieve the shared objective of restoring stability and investor confidence in our financial markets.

L.D.

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