Hedge Fund Disclosure Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Hedge Fund Disclosure Act''.

SEC. 2. FINDINGS.

    The Congress finds as follows:
            (1) Hedge funds currently operate largely outside the 
        framework of substantive United States banking, securities, and 
        futures laws and regulations.
            (2) The recent crisis of a large hedge fund demonstrated 
        several ways in which the condition of major financial 
        institutions in the United States, including many banks with 
        federally insured deposits, reflects the success or failure of 
        various hedge funds.
            (3) Among other things, financial institutions often invest 
        in hedge funds, lend to hedge funds, act as counterparties in 
        securities and derivatives transactions with hedge funds, and 
        conduct proprietary trading activities that mirror the 
        investment strategies of leading hedge funds.
            (4) In several cases, hedge funds utilize financial 
        leveraging practices to a greater degree than do many regulated 
        financial institutions and this high degree of leverage 
        exacerbates the extent to which such hedge funds potentially 
        pose a threat to the safety and soundness of the United States 
        and international financial systems.
            (5) Given that most of the institutions and wealthy 
        individuals that invest in hedge funds are highly 
        sophisticated, market forces, rather than government 
        regulations, are the best tools for constraining hedge funds 
        from engaging in excessive leverage.
            (6) Market forces are similarly the most effective means of 
        disciplining financial institutions that have allowed hedge 
        fund dealings to threaten their stability.
            (7) The United States Government must insure that the 
        failure of 1 or more hedge funds never causes a severe burden 
        on the United States financial system or the United States 
        payments system and that Federal resources are not squandered 
        in efforts to salvage collapsed hedge funds.
            (8) Market forces cannot properly function with respect to 
        hedge fund risks without a minimum of reliable information 
        about hedge funds activities.

SEC. 3. DEFINITIONS.

            (1) Board.--The term ``Board'' means the Board of Governors 
        of the Federal Reserve System.
            (2) Federal banking agencies.--The term ``Federal banking 
        agency'' has the meaning given to such term in section 3(z) of 
        the Federal Deposit Insurance Act.
            (3) Unregulated hedge fund.--The term ``unregulated hedge 
        fund'' means--
                    (A) any pooled investment vehicle that--
                            (i) has capital of $3,000,000,000 or more;
                            (ii) is privately organized, administered 
                        by professional investment managers, and not 
                        widely available to the public; and
                            (iii) is not registered as an investment 
                        company under the Investment Company Act of 
                        1940; and
                    (B) any group or family of pooled investment 
                vehicles described in clauses (ii) and (iii) of 
                subparagraph (A) that has total assets under management 
                of $20,000,000,000 or more.

SEC. 4. PUBLIC REPORTS REQUIRED.

    (a) In General.--Before the end of the 15-day period beginning at 
the end of each calendar quarter, each unregulated hedge fund shall 
submit a report to the Board which shall include the following 
information:
            (1) The total assets of the fund, the total notional amount 
        of the fund's derivatives position, and the balance sheet 
        leverage ratio of assets to liabilities, as of the end of the 
        calendar quarter.
            (2) Meaningful and comprehensive measures of market risk 
        (such as value-at-risk or stress test results) as of the end of 
        the calendar quarter.
            (3) Such other information as the Board, in consultation 
        with the Secretary of the Treasury, the Chairman of the 
        Securities and Exchange Commission, the Chairperson of the 
        Commodities Futures Trading Commission, and the Federal banking 
        agencies, may require by regulation.
    (b) Availability of Reports.--Upon receipt of reports under 
subsection (a), the Board shall--
            (1) immediately transmit copies of the reports to the 
        Secretary of the Treasury, the Chairman of the Securities and 
        Exchange Commission, the Chairperson of the Commodities Futures 
        Trading Commission, and the Federal banking agencies; and
            (2) subject to subsection (c), make the reports available 
        to the public on a timely basis.
    (c) Sequestration of Any Proprietary Information.--If, in order to 
provide a complete and meaningful report under subsection (a), an 
unregulated hedge fund includes any proprietary information concerning 
investment strategies and positions in the report, such information 
may, to the extent and in the manner provided in regulations prescribed 
by the Board, in consultation with the Secretary of the Treasury, the 
Chairman of the Securities and Exchange Commission, the Chairperson of 
the Commodities Futures Trading Commission, and the Federal banking 
agencies, be segregated in a confidential section of the report which 
shall not be available to the public under subsection (b)(2).
    (d) Regulation Time-Frame.--The Board shall--
            (1) publish proposed regulations under this section in the 
        Federal Register before the end of the 90-day period beginning 
        on the date of the enactment of this Act, to allow for public 
        comment; and
            (2) prescribe such regulations in final form before the end 
        of the 90-day period beginning on the date the proposed 
        regulations are so published, unless the Board determines that 
        additional time, not to exceed 60 days, for comment on the 
        proposed regulations is necessary.
    (e) Orders.--The Board may issue an order to any unregulated hedge 
fund to comply with the requirements of this section and the 
regulations prescribed under this section.

SEC. 5. JUDICIAL ENFORCEMENT OF ORDERS.

    (a) In General.--The Board may, in the sole discretion of the 
Board, apply to--
            (1) the United States district court within the 
        jurisdiction of which the principal office of the unregulated 
        hedge fund is located; or
            (2) in the case of an unregulated hedge fund which is a 
        person of a foreign country (as defined in section 3502(d) of 
        the Omnibus Trade and Competitiveness Act of 1988) and borrows 
        from, accepts investments by, or is a counterparty to any 
        person who resides within or is organized under the laws of the 
        United States or any State, the United States District Court 
        for the District of Columbia,
for the enforcement of any effective and outstanding order issued under 
section 3 or 4, and such court shall have jurisdiction and power to 
order and require compliance therewith.
    (b) No Judicial Review.--No court shall have jurisdiction to affect 
by injunction or otherwise the issuance or enforcement of any order 
under section 4 or to review, modify, suspend, terminate, or set aside 
any such order.

SEC. 6. PUBLIC DISCLOSURE OF DIRECT MATERIAL EXPOSURES TO SIGNIFICANTLY 
              LEVERAGED FINANCIAL INSTITUTIONS.

    (a) Sense of the Congress.--It is the sense of the Congress that 
each public company, including financial institutions, should regularly 
and publicly disclose a summary of direct material exposures of the 
company, whether in the form of equity, loans, or other credit 
exposure, to significantly leveraged financial institutions, including 
commercial banks, investment banks, finance companies, and unregulated 
hedge funds.
    (b) Regulations Authorized.--The Securities and Exchange 
Commission, the Commodities Futures Trading Commission, and the Federal 
banking agencies shall prescribe regulations to require the disclosures 
described in subsection (a).

SEC. 7. ENHANCED COUNTERPARTY RISK MANAGEMENT BY DEPOSITORY 
              INSTITUTIONS.

    Section 39(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
1831s(a)(1)) is amended--
            (1) by redesignating subparagraphs (E) and (F) as 
        subparagraphs (F) and (G); and
            (2) by inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) counterparty risk management;''.

Summary: Defines unregulated hedge fund as: (1) any pooled investment vehicle with capital of $3 billion or more that is privately organized, administered by professional investment managers, not widely available to the public, and is not registered as an investment company under the Investment Company Act of 1940; and (2) any group or family of such pooled investment vehicles with total assets under management of $20 billion or more.
Authorizes judicial enforcement of orders issued by designated regulatory agencies. Denies judicial review of any order issued by such agencies.
Expresses the sense of Congress that each public company, including financial institutions, should regularly and publicly disclose a summary of its direct material credit exposures to significantly leveraged financial institutions, including commercial banks, investment banks, finance companies, and unregulated hedge funds.
Directs the Securities and Exchange Commission, the Commodities Futures Trading Commission, and the Federal banking agencies to prescribe regulations to require such disclosures.
Amends the Federal Deposit Insurance Act to mandate that each appropriate Federal banking agency prescribe safety and soundness standards pertaining to counterparty risk management.