# kaal:claim:1428387-033

**Claim.** Mandatory risk disclosure to the SEC would probably fail on staffing grounds, because professionals capable of understanding hedge fund risk data would be disincentivized to use that knowledge for supervision rather than economic gain, finding the private sector far more lucrative.

**Type.** failure  **Support.** argued

**Holds when.**

- where the regulator must interpret data on hard-to-value assets and complex instruments

**Source quote.**

> Professionals who could understand the risk data would probably be disincentivized to use their knowledge for purposes of supervision rather than economic gain. Knowledgeable risk analysts may find the private sector much more lucrative than the public sector.

**From.** Kaal, *Hedge Fund Valuation Retailization, Regulation, and Investor Suitability* (2009), VI.C Valuation and Risk Disclosure, page 50

**Cite as.** Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387

**Verify.** sha256 of source PDF `6aa3a280dc6750723be2389f3af2aabf3a16c4ce20e49fcdaddd7f2ea95a67aa` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202009%20-%20Hedge%20Fund%20Valuation%20Retailization%2C%20Regulation%2C%20and%20Investor%20Suitability.pdf

**Failure mode.** regulator-staffing-gap  (family: supervisory-capacity-gap)

**Topics.** securities-law, disclosure, risk-and-incentives

**Keywords.** regulatory-capacity, adverse-selection, sec, risk-disclosure

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