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Mr. Chairman, thank you for holding this hearing today.

Chairman Donaldson, thank you for appearing before us today discuss recent SEC initiatives to oversee the hedge fund industry.

Over the past few years, the demands on the Securities and Exchange Commission and its staff have been enormous. With the accounting scandals, the global research settlement, and the very recent mutual fund industry problems, the SEC has focused its attention on how to improve and make our markets equitable for investors. I believe that the SEC and its staff have done a tremendous job in restoring investor confidence. In addition, we have given the SEC more money and the ability to hire more staff to make that happen.

With respect to the SEC proposal on hedge funds that was approved yesterday, I have some very serious concerns that the SEC may be focusing too much on this segment of the market and away from its oversight responsibility for the Sarbanes-Oxley Act and the mutual fund industry. As I understand it, only institutional and/or wealthy investors can invest in hedge funds. With the hedge fund proposal, I believe that the SEC may be tempted to stretch its resources too thin so that it can protect the Warren Buffetts of the world at the expense of ordinary, retail investors.

At the Commission meeting yesterday, statistics showed that the 46 cases brought by the SEC against hedge funds in the past five years represent only two percent of the SEC's enforcement docket for that time. In addition, of those 46 cases it is unclear how many would have been under the purview of the hedge fund proposal. It is my understanding that the SEC intends to hire 100 new staff for the hedge fund initiative an increase of 25 percent of the current SEC staff overseeing mutual funds. My question for the Chairman is whether the SEC needs a 25 percent increase of staff to oversee what appears to be a two percent problem?

One of the primary arguments for requiring hedge funds to register with the SEC, is the increasing amount of pension fund money is being invested with hedge funds. As a member of the Health, Education, Labor and Pension Committee, I know that the Department of Labor is solely responsible for oversight of the pension industry. I am troubled by the fact that the SEC has not involved the Department of Labor nor asked for its guidance in the hedge fund proposal.

While I fully support the efforts of the SEC and its staff to oversee all aspects of our equities markets, I am very concerned that placing too much emphasis on one segment of the market may jeopardize the SEC's ability to oversee the broader markets for retail investors. The Sarbanes-Oxley Act and the recent mutual fund reforms are just too important for ordinary investors.

Mr. Chairman, I look forward to your testimony today. In addition, I would like some assurances that the SEC does not ignore its current statutory authority to protect retail investors.