SEC under pressure: Hedge funds file multiple lawsuits against watchdog
SEC under pressure: Hedge funds file multiple lawsuits against watchdog
In October, in an effort to increase transparency in the financial markets, the SEC issued rules requiring greater disclosure of short sales and securities lending.
In justifying the new rules, SEC Chairman Gary Gensler noted that short selling and securities lending are two opaque areas of the market that would benefit from disclosure, BitcoinSistemi reported.
"It is important for the SEC and the public to know more about short-selling activity in the equity markets, particularly during periods of stress or volatility," Gensler commented on the adoption of the new rules.
The Association believes that the SEC has taken an inconsistent position in these rules, in one instance allowing aggregation of transaction reports to protect investor positions while at the same time requiring separate disclosure of other transaction reports.
The lawsuit says the U.S. regulator failed to account for this inconsistency, and as a result, the rules will harm investors. The hedge funds' statement also points out that the rules violate the Administrative Procedure Act, which requires agencies to justify their rules and consider the views of other market participants.
"Despite our best efforts, the SEC has chosen to ignore the interrelated nature of these two rules and has failed to apply a consistent principle to the regulation of these interdependent markets," said Brian Corbett, president and CEO of the Managed Funds Association, in a press release.
The Alternative Investment Management Association and the National Association of Private Fund Managers agree with Corbett.
At the same time, fund managers believe that the new rules also encourage the disclosure of confidential investment strategies and could facilitate various types of manipulation.
It's worth noting that the SEC is separately fighting lawsuits filed by the same three groups, along with other associations, challenging two other rules related to private fund regulation and proxy voting recommendations.
Namely, the U.S. regulator recently suffered a major defeat in a court battle against cryptocurrency companies Ripple and Grayscale.
