Document Type
Article
Publication Date
2000
Abstract
The financial collapse of Long Term Capital Management, L.P., has led federal regulators and financial regulators to question whether additional regulatory constraints on a hedge fund's use of leverage are necessary to protect against financial market disruption. This Article discusses whether additional regulation is needed to protect against the possibility of systemic loss triggered by a hedge fund's excessive use of leverage. After reviewing the existing federal regulations to which hedge funds are potentially subject, this article concludes that private market regulation, through the exercise of more diligent market discipline by both hedge funds and those entities that extend credit to hedge funds, is needed to protect against systemic loss. Further, the Article concludes that public regulation requiring hedge funds to disclose comprehensive information about their trading positions to financial regulators is also needed. Without such disclosures, hedge funds can assume dangerous levels of leverage that could disrupt financial markets without the foreknowledge of financial regulators, as illustrated by LTCM's recent predicament.
Publication Title
Temple L. Rev.
Volume
73
First Page
681
Recommended Citation
Gibson, Willa E., "Is Hedge Fund Regulation Necessary?" (2000). Akron Law Faculty Publications. 291.
https://ideaexchange.uakron.edu/ua_law_publications/291
