White House (Reuters) – A number of regulation amendments aimed at the nation’s funds industry were approved by the U.S. Securities and Exchange Commission on Wednesday, which is headed by chair Gary Gensler. The modifications represent the largest industry transformation in recent memory. These are the key points:
Hedge fund and private equity fees
The SEC completed a comprehensive revamp of private rules on Wednesday with the goal of enhancing fairness and transparency in the sector, which is responsible for managing more than $20 trillion in assets. The modifications include tightening disclosure regulations, banning particular types of fees, and mandating routine audits.
The $5.5 trillion money market fund industry received stronger regulation from the SEC in July.
One of the controversial new rules that was implemented required money market funds to charge mandatory fees if daily net redemptions of more than 5% of net assets occurred, provided the fund’s liquidity costs were extremely low. Additionally, it allows the board of a fund the authority to charge a fee if necessary.
Other adjustments include raising the percentage of liquid assets that funds must hold on hand and eliminating redemption suspensions, which can cause investors to withdraw their money in a panic.
The SEC has also suggested additional regulations to help the mutual fund sector as a whole better prepare for times of difficulty. In order to better resist redemptions, this proposal would require that at least 10% of the net assets of mutual funds and some exchange-traded funds be highly liquid.
“FORM PF” DISCLOSURES FOR THE HEDGE FUND
The SEC amended the forms that private funds are required to submit to the regulator in May, requiring large hedge fund advisers and all private equity fund advisers to submit such reports during periods of significant stress, such as significant margin events or the termination of prime broker relationships.
The number of days investors must declare after acquiring a 5% share in a public business would be cut in half, to five, according to a proposal made by the agency last year. The rule targets activist investors that acquire stock in businesses through open market transactions. According to the SEC, hastening disclosures is better for ordinary investors, who are hurt by the present 10-day window.
DEFINITION OF A DEALER
To improve market resilience and level the playing field, the SEC has created a plan that would broaden the definition of broker-dealers and compel Principal Trading Firms to register with the organisation.