Buckeye Institute Analysis Reveals How Over-Regulation of Investment Managers will Harm OhioansSep 30, 2021
Columbus, OH – In a new policy brief, Over-Regulation of Investment Managers Can Harm Ohioans, The Buckeye Institute analyzes the impacts and unintended consequences of the Short Sale Transparency and Market Fairness Act, which “would impose new and unnecessary regulatory burdens on market investors” that would lead to lower returns for Ohio pension funds and taxpayers.
“Ohioans have $50 billion invested with financial institutions that would be impacted by these proposed inefficient rules, and all of them—from retirees to charities to schools and universities— could see smaller returns on their investments if this legislation is adopted by Congress and signed into law,” said Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute, and author of the policy brief. “The legislation offers a solution in search of a problem, with duplicative regulatory requirements that even the Securities and Exchange Commission has deemed unnecessary. And the unintended consequences of this misguided bill will ripple through the markets ultimately forcing taxpayers to make up the difference.”
In the brief, Buckeye outlines the problems with the Short Sale Transparency and Market Fairness Act—which would impose many new reporting requirements on institutional investors with at least $100 million under investment management— including:
- Authorizing the Securities and Exchange Commission to require that investment managers disclose their investment positions to the commission monthly, rather than the current quarterly reporting requirement, and directs the commission to issue new rules regarding disclosure of short-sale positions and confidential treatment of public disclosures.
- Reporting requirements that reach far beyond Wall Street hedge funds and will impact pension funds, endowment funds, mutual funds, banks, and other large joint investors.
- Duplicative transparency and disclosure requirements.
- The potential of increased fraud and mismanaged companies, which short sellers often discover and provides valuable information that makes the market more efficient and less volatile.
- The potential increase of investment “free riding”, wherein copycat investors copy other investors original investment research, which discourages independent in-depth research, innovation, and risk-taking.
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