Senators Chuck Grassley, R-Iowa, and Carl Levin, D-Mich., have introduced legislation to close a loophole in securities law that allows hedge funds to operate under, what they call, a cloak of secrecy. The Hedge Fund Transparency Act of 2009 would remove any doubt that the Securities and Exchange Commission has the authority to require hedge funds to register, so the government knows who they are and what they're doing.
The bill would close the loophole previously used by hedge funds to escape the definition of an "investment company" under the Investment Company Act of 1940.
Hedge funds that want to avoid the requirements of law would be exempt only if they file basic disclosure forms and cooperate with requests for information from the Securities and Exchange Commission.
"There wasn't much of an appetite for this sort of legislation before the financial crisis. I hope attitudes have changed," Grassley said. "Instead of the free flow of reliable information that markets need to function properly, today we have confusion and uncertainty fueling an economic crisis."