In one of her first public speeches, SEC Commissioner Kathleen Casey commended to the attention of market regulators the President's Working Group on Financial Markets recently-issued principles addressing the activities of hedge funds. The principles properly focus on three main areas: investor protection, operational risk, and potential for systemic risk, said the commissioner in remarks delivered at a global finance seminar hosted by the New York Federal Reserve and the European Commission.
The commissioner believes that the role of the PWG is of particular value in the EU-U.S. dialogue in that it presents a constructive forum to address comprehensively financial market issues that cross regulatory authorities within the United States. She urged the PWG to continue to examine the role and risks of hedge funds in the financial markets. Similarly, through its members, the working group should consider appropriate actions to ensure that investor protection, operational risk and systemic risk are adequately addressed and managed in the market.
The principles acknowledge the significant benefits that private capital pools bring to the financial markets, she continued, while recognizing the risks they present, in part due to a lack of transparency. They generally view market discipline by creditors, counterparties and investors as the most effective way to limit systemic risk and maintain appropriate investor protection standards. The PWG is composed of the chairs of the SEC, CFTC, Federal Reserve Board, and the Treasury Secretary.