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29 Jan 2008

SEC Comissioner Says Hedge Funds May Help Solve Market Turmoil

SEC Commissioner Paul Atkins recommended that European and US regulators should learn from each other’s approach to regulating hedge funds, particularly as the hedge fund industry became more international. Atkins said he also expects hedge funds to help solve the market turmoil surrounding sub-prime US mortgage loans.

The Comissioner resisted the agency’s efforts to become involved with hedge funds since he joined the SEC as a commissioner in 2002, the Republican has also questioned the agency’s practice of not allowing hedge funds to market themselves to the general public.

"Most importantly, we must remember that hedge funds are likely to be an important part of the solution to the sub-prime crisis," he told French business school Edhec that, as far as he was able to see, hedge funds could not be blamed for the sub-prime problems.

"Hedge funds and other shareholder activists may have created a negative impression by pursuing their own self-serving agenda at times. This problem may be exacerbated by 'empty voting' and similar practices that are based on decoupling voting rights from economic interests. This is why good disclosure is so important in this area." Atkins also warned that, while shareholder activists can play a valuable role in corporate governance, they will be acting in their own interests and these will not necessarily be the same as the interests of their fellow shareholders.

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