Fixing the Outdated Structure

Human capabilities have produced some sensational by-products over the years. They have led us to milestones that were once considered as well out of our reach, and such a dynamic has been evident throughout the spectrum. Now, when you look at things from the said perspective, it can easily make you feel as if we are pretty much limitless in our reach, but that’s barely the case. You see, despite all the ingenious potential, human beings do have their fair share of limitations. These limitations, in turn, have proven to take many different shapes, and at times, they have also morphed into a more detrimental form. Recognizing the risk in play here, we have gone on to establish dedicated watchdogs within every major sphere. These watchdogs are responsible for protecting our best interests under all circumstances. Of course, they do so with meticulously-crafted regulations. If we talk about the said regulations for a second, we’ll realize how they are so widely-present in today’s world. However, our current regulatory framework still suffers from some enormous loopholes, and SEC has just made a proposal to close one of them.

Securities and Exchange Commission has officially proposed some new rules, which are designed to bolster scrutiny on hedge funds and private equity funds. Using a reimagined disclosure structure as the primary tool, the commission hopes to take up a more productive position in terms of monitoring system risks. According to certain reports, a change in rules here will introduce a significant obligation for the private funds to report any material events within one business day rather than on a quarterly or annually basis. Furthermore, it will also bring down the Form PF, a tool to disclose purchases and sales of securities to the SEC, reporting threshold from $2 billion in assets under management to $1.5 billion, thus widening the commission’s radius by a big margin.

“We’d had issues and challenges in private funds earlier and the transparency the U.S. government had into it was scant at best,” said SEC Chair, Gary Gensler. “After almost a decade of experience analyzing the information collected in Form PF, we have identified significant information gaps and situations where we would benefit from additional information,”

Beyond that, SEC went ahead and proposed increasing the number of treasury trading platforms currently falling in the agency’s Fair Access Rule, which ensures that these trading platforms are not unfairly denying or limiting anyone’s access to them. Rooted in what happened during the GameStop controversy, the new rules, notably, don’t ask the funds to publicly disclose the new data. Instead, they will only be implemented as a way to assist the regulators in spotting “signs of trouble, such as big losses, significant margin and counterparty default events, and other events associated with withdrawals and redemptions.”

At the moment, SEC’s proposal is still subject to public consultation.

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