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In this shared blog, David Weisberger says a recent WSJ article is wrong and that traders do need to purchase faster and more comprehensive market data to avoid being fined for violating "Best Execution" obligations.

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January 1, 2005

Senator Warns SEC on Hedge Funds

By Gregory Bresiger

U. S. Senator John Sununu (R-N.H.) is critical of the Securities and Exchange Commission's recent decision to require hedge fund registration.

"First and foremost I am concerned about all these new regulations and the direction it signals from the SEC," according to Sununu, a member of the Senate's Banking, Housing and Urban Affairs Committee. "It does create a bullseye on the industry's back," he added in comments to a recent Securities Industry Association conference. An SEC official, who previously spoke at the conference, defended the commission's decision, arguing, "no one knows much about hedge funds."

Still, Sununu complained that the SEC - in requiring that hedge fund managers register under the terms of the Investment Advisor Act - was taking a, "defensive posture" because it had been embarrassed by missing most of the recent mutual fund scandals.

Sununu warned that, "there is no empirical data that registration leads to better performance." He also stressed that hedge funds serve a critical purpose in providing liquidity for markets.

He contended that the overtaxed SEC should spend fewer resources on the hedge funds - generally the investment of the well-heeled and now with increasing institutional presence - and focus on "the 90 percent of Americans who invest in mutual funds."

Nevertheless, Paul Roye, the SEC's Director of the Division of Investment Management, stressed that, "we're regulating advisers, not the funds." And he argued that the commission does not "want to impede the various trade strategies of hedge funds."

However, he stressed that the staff supported registration because no one has accurate figures on the industry and because hedge fund advisers were caught in some of the late trading scandals. He said that soon the new rules from the commissions decision will be at the SEC's Website.