WASHINGTON (HedgeWorld)–Although Harvey Pitt’s brief tenure at the Securities and Exchange Commission saw the launch of an investigation of hedge funds, people familiar with the matter do not believe that he was the driving force in that investigation.
Joe Nesler, an attorney with the firm of Gardner, Carton, & Douglas, Chicago, said Thursday that the inquiry was more Paul Roye’s idea that Harvey Pitt’s.
“Roye was more a pro-regulatory person, Pitt was never enthusiastic about regulation,” said Mr. Nesler, who has many hedge fund clients, some of whom have received questionnaires from the SEC in the course of the investigation. Although it’s possible that Mr. Pitt’s departure might strengthen the hand of pro-regulatory figures in the industry such as Mr. Roye, Mr. Nesler hopes the impetus to scapegoat hedge funds for financial woes has already reached high tide and begun to ebb, regardless of who the next chairman is.
“When things first break,” such as the Enron crash and its aftermath, “there is always a headlong rush to regulation. But, when people then sit down to look at things carefully, they often realize that the problems are not as great as they seemed at first or perhaps stem from different areas,” he said. The would-be regulators of hedge funds are entering that latter phase now.
Tough Cop/Quiet Administrator
There are many hypotheses circulating about who might be chosen to replace Mr. Pitt. Some informed observers believe that the White House will want to pick someone with a tough cop reputation, such as Gary Lynch, a former SEC enforcement chief who is now general counsel to Credit Suisse First Boston.
But others suggest that the White House may chiefly want a quiet, competent administrator who will keep the SEC out of the headlines.
Mr. Pitt, who didn’t quite fit either of those categorizations, has many admirers in the securities bar, including many who represent hedge funds. Some of those admirers said this week that they were dismayed at the political ineptitude that forced his resignation.