Hedge Fund Regulation

Hedge funds are well-regulated investment tools.

In the U.S., Europe and beyond, regulators have extensive oversight of hedge fund managers and a wealth of information about their investment activities. Large managers in the U.S. register with the Securities and Exchange Commission and the Commodity Futures Trading Commission. They must also file extensive reports about their portfolios and counterparty exposure. Small fund managers are subject to state registration, examination and reporting requirements.

European fund managers are subject to several EU regulatory laws, including the Alternative Investment Fund Managers Directive and European Market Infrastructure Regulation. The European Commission and European Securities and Markets Authority, as well as country regulators like the Financial Conduct Authority, establish rules and standards overseeing fund managers.

Every manager is subject to securities and commodities laws as well as laws prohibiting insider trading, market manipulation and fraud.

This video breaks down the layers of state and federal regulations with which the industry complies. In addition to laws specifically focused on hedge fund activities, all fund managers are subject to federal laws prohibiting insider trading, market manipulation and fraud. Finally, while the industry is highly-regulated, there is no government backstop and no hedge fund received a Troubled Asset Relief Program bailout during the financial crisis.

Additional Resources