[Congressional Record (Bound Edition), Volume 152 (2006), Part 17]
[Senate]
[Page 22387]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              HEDGE FUNDS

  Mr. SPECTER. Mr. President, earlier today the Judiciary Committee 
held a hearing on hedge funds and what is happening in that important 
area where we now find that we have an area in the securities field 
which involves some $1.3 trillion, some 30 percent of the stock 
trading, and no regulation. The Judiciary Committee held hearings 
contemporaneously with the consideration of Sarbanes-Oxley and that 
legislates in the field to deal with criminal sanctions for insider 
trading violations. The issue which we took up in some detail in the 
Judiciary Committee today involves allegations that there was insider 
trading, a matter yet to be resolved. But out of the Judiciary 
Committee inquiry, draft legislation has been circulated which has 
three very important provisions.
  First of all, on criminal jurisdiction there are Federal decisions 
which have precluded the Department of Justice from collaborating with 
the Securities and Exchange Commission. The draft legislation which has 
been circulated would authorize that. There is no reason the SEC and 
the Department of Justice should not be able to collaborate when they 
find evidence of criminal conduct to act to prosecute.
  The second provision of the draft legislation would authorize more 
compensation for whistleblowers. The fact is, the SEC is doing very 
little by way of encouraging whistleblowers to bring forward insider 
information and to stop insider trading. The legislation would 
authorize the Attorney General to provide for compensation up to 30 
percent for whistleblowers from a penalty, fines or settlement, and 
also protection for the whistleblowers.
  The third provision in the draft legislation which has been 
circulated would provide for regulations on small investors who do not 
have the sophistication to conduct due diligence and also for pension 
funds which are invested in hedge funds.
  The testimony of the attorney general from Connecticut, Richard 
Blumenthal today went into some detail about how the failure of 
Amaranth recently, which amounted to some $6.5 billion, touched pension 
funds and many of the small investors.
  We have circulated this legislation, and we will be asking for 
comments. I thought I would describe it very briefly this afternoon. It 
will be introduced formally as soon as we have had an opportunity to 
get comments from interested parties.
  (The remarks of Mr. SPECTER pertaining to the introduction of S. 4081 
are printed in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  The PRESIDING OFFICER (Mr. Isakson). The Senator from West Virginia.

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