Word: donaldson
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...President has struggled to find a Treasury boss who has won the respect of Wall Street and the Bush inner circle. JOHN SNOW is expected to remain in place, at least for a while, but it's almost certain that the search will go on. A possible replacement: WILLIAM DONALDSON, the former investment banker who, after a sluggish start as head of the Securities and Exchange Commission, is beginning to win praise for steering the agency into more aggressive scrutiny of slippery business practices. A Donaldson drawback: he has alienated some Republicans with his calls to increase government regulation...
WITH STOCKS SPUTTERING AGAIN, investors of all stripes are flocking to a familiar fad: hedge funds, which are supposed to deliver decent gains even in bad markets. Yet the "gold-rush mentality," warns William Donaldson, chairman of the Securities and Exchange Commission (SEC), not only threatens our retirement savings but also could one day destabilize the world's money system...
...crush of Everyman money flowing into what can be a risky investment is a big part of what troubles the SEC. Donaldson told TIME the SEC will begin requiring all hedge-fund advisers to register with the SEC before the end of the year. He proposed the rule in July and says that "the preponderance of people" who offered comment were in support. Registering would force hedge funds to disclose information such as their trading strategy, the amount of money they manage and whether they have been disciplined by regulators. "The last few years there has been an increasing number...
...manager attempts to multiply profits by borrowing many times over the amount of assets in the fund. Such borrowing is legal, and even expected, but since Long-Term Capital's meltdown, the Federal Reserve has established safeguards and has been closely monitoring bank lending to hedge funds. Even so, Donaldson says, "there could be a systemic risk coming...
...woeful 1%. The hedgies are under pressure to pump up returns to justify their steep fees--which run to 2% of assets plus 20% of profits. The SEC's primary concern is fraud, in which a hedge fund hides losses or misstates the value of its holdings. Worse, says Donaldson, is the kind of cheating that came to light in last year's mutual-fund scandals. Some hedge funds had schemed with investment firms to trade mutual funds on the basis of outdated prices, allowing hedgies to profit at the expense of long-term mutual-fund investors...