The disclosure debate

The US Securities and Exchange Commission implemented new hedge fund registration rules in February. Some investors are already calling for greater disclosure, but the voluntary introduction of independent valuations might be more effective, argues Penny Cagan

New disclosure regulations for hedge funds that went into effect in the US in February (Risk March 2006, page 64) are a good start in terms of ferreting out fraud within the sector, but they are perhaps not as targeted as they need to be. This may be the time for the hedge fund industry itself to take the initiative ahead of what may be inevitable tougher regulations.

Any solution should address a central theme of many hedge fund misdeeds: fraudulent valuations. The present set of disclosure