US needs 'tight hedge fund rules'

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US regulators have called for greater oversight of hedge funds, and more transparency over the way they work.

The Securities and Exchange Commission was speaking to the Senate Judiciary Committee as lawmakers mull whether or not to increase hedge fund regulation.

There have been calls for greater control after Amaranth Advisors, a US-based hedge fund, lost about $6bn (£3.2bn) betting on gas prices.

Since emerging, hedge funds have gained increased power in financial markets.

Uniform rules

According to some estimates, hedge funds control about 5% of all US assets and are responsible for more than a quarter of all equity trades.

The SEC said it was planning to put together a database of hedge fund trades.

"Insider trading by hedge funds remains a substantial concern to the division, and represents a significant focus of our current enforcement efforts," said Linda Thomsen, the head of the SEC's enforcement division.

The problem for regulators is that investors like pension funds can often be affected by hedge fund trades.

Richard Blumenthal, the Connecticut state attorney general, claimed that a pension fund in California lost close to $87m because of Amaranth's problems.

"We should have uniform national rules, stronger protections for investors in disclosure and accountability than we do now," he said.