NEWS

In prepared testimony for a hearing Thursday, May 7, before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, the Coalition of Private Investment Companies (CPIC) outlined a new oversight regime.

“I am a strong supporter of the SEC, its dedicated staff, and its mission,” said James Chanos, chairman of CPIC and founder and president of Kynikos Associates LP. “ If we are going to put more work on the plate of this already overstretched agency, we need to provide it with a statute designed for the unique characteristics and activities of private investment funds. Such a statute could, of course, draw upon established regulatory practice.”

To guide development of such an oversight regime,

- Treat all private investment funds similarly in any new regulation, regardless of the investment strategy — including hedge funds, private equity, and venture capital
- Draw upon the work of the President’s Working Group Asset Managers and Investors Committees (Their reports suggest many specific areas for improvements, crafted for the unique nature of private investment companies, and a number of the proposed standards exceed the standards for other market participants.)
- Scale regulation for systemic risk and market stability to the entity’s size, with a greater focus placed upon the largest funds or family of funds.

Chanos also underscored the need for greater transparency and accuracy in financial reporting to shareholders, counterparties, and the market. “Undermining accounting standards may provide an illusion of temporary relief, but will ultimately result in less market transparency and will undermine investor confidence, thereby lengthening the recovery.”