American hedge funds face stricter regulation

America's hedge funds are set to become more transparent under plans being put forward by the US Securities and Exchange Commission to force the secretive industry to register their business with the country's financial regulator.

America's hedge funds are set to become more transparent under plans being put forward by the US Securities and Exchange Commission to force the secretive industry to register their business with the country's financial regulator.

Public consultation on the initiative, which is being challenged by various sections of the hedge fund industry, ends today. The commission that has been set up to consider the move will then vote. It is likely to push ahead with the plan, which has been endorsed by the SEC chairman, William Donaldson.

However, it could face a legal challenge. The SEC has already received a letter from one law firm, Wilmer Cutler Pickering Hale and Dorr, disputing its legal power to force through changes to laws governing hedge funds, under which hedge funds are exempt from a series of regulatory hurdles that other funds have to comply with.

Several pension funds have supported registration, which would apply to hedge funds with more than $25m (£14m) under management. Representing the hedge fund industry, the Managed Funds Association has warned that the plan would have a detrimental effect on the stock market.

The SEC has not set a timescale for getting hedge funds to register, but it is expected in the next few months.