Last week we wrote that Chanos doesn’t think hedge funds are the ones that need regulation; banks, insurance companies, and the rest of gamut are the guys to focus on.
We were swiftly told (by one of his colleagues) that actually, Jim Chanos is really into regulation – of everyone.
The medicine Chanos prescribes is this: Anti-money laundering programs, registration, robust disclosures to investors, regular audits, and the SEC should insist funds adopt risk management plans to identify and control material and systemic risks.
Of course banks, insurance companies, and all of the enterprises that receive federal aid should get a stronger dose of whatever the SEC serves up, but if the SEC was Big Brother and was just one person, Chanos would be all about propping him up on his shoulders and helping him look into what hedge funds are up to.
Bottom line, this is Chanos on hedge fund regulation: Regulating hedge funds more will protect investors and other hedge funds. The SEC should do it, but not focus all of its energy on what makes up one per cent of the world’s financial assets, hedge funds.
His testimony makes a lot of sense. Let’s hope the SEC works with Chanos, the guy who first discovered Enron’s flaws. He’s practically out in the fields with a scythe, trying to help the SEC reap regulation.