In the wake of stock market bubbles hitting companies like GameStop and AMC Theatres, Congress is once again searching for “solutions.” Unsurprisingly, Congress’s solution—dubbed the Short Sale Transparency and Market Fairness Act—would increase regulatory burdens substantially, this time on investment fund managers, and, according to government regulators, would provide little beneficial information compared to existing reporting requirements. 

What this proposed law would do is make it harder for nonprofits to serve their communities, for colleges and universities to provide scholarships to needy students, and for under-funded pension funds to pay retirees. 

All these institutions—nonprofits, colleges, and pension funds—rely on investment fund managers to invest and manage their money wisely so that money can be used for its intended purposes, which is ultimately to help and support Ohioans. The fund managers covered by these proposed rules invest billions of dollars on behalf of community organizations, schools, and retirees in Ohio and other states, managing more than $50 billion for Ohio-based institutions in 2020 alone.

Regrettably, the expanded regulatory requirements in the poorly crafted law would make it harder for fund managers to serve these institutions and could wreck successful investment strategies by allowing unscrupulous actors to steal their competitors’ playbooks—in fact, research shows that the existing regulatory reporting requirements cause a four percent loss in investment fund profits. Expanding these regulations would only exacerbate that loss.

Adding insult to injury, the rules are unnecessary. Regulators already have access to volumes of reporting information under existing law and the Securities and Exchange Commission—the agency tasked with regulating investment funds—concluded that even real-time reporting would not provide beneficial information compared to existing law.

While the ramifications of the GameStop and AMC bubbles on individual investors who lost life savings or incurred enormous debt is heart-wrenching, Congress’s proposed solution to over regulate the industry that manages investments for nonprofits, colleges, and pension funds will not protect individuals involved in the stock market. What it will do is harm Ohioans who rely on the profits these investment funds earn.

Rea S. Hederman Jr. is executive director of the Economic Research Center and vice president of policy at The Buckeye Institute.