# kaal:claim:2714974-029

**Claim.** Any prescriptive regulatory regime for hedge funds risks leaving the financial system less stable rather than more stable, because counterparties relax vigilance when they believe authorities are monitoring and constraining fund risk taking.

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

**Holds when.**

- applies to prescriptive position reporting and monitoring regimes

**Source quote.**

> A risk of any prescriptive regulatory regime is that, by creating moral hazard in the marketplace, it leaves the system less rather than more stable.

**From.** Kaal and Oesterle, *The History of Hedge Fund Regulation in the United States* (2016), INDIRECT HEDGE FUND REGULATION, page 26

**Cite as.** Kaal and Oesterle, The History of Hedge Fund Regulation in the United States (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2714974

**Verify.** sha256 of source PDF `7764601d3ed5bb056b58949e8411eff9dfb9855f143719062030c980c5fa801b` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Oesterle%20-%202016%20-%20The%20History%20of%20Hedge%20Fund%20Regulation%20in%20the%20United%20States.pdf

**Failure mode.** Prescriptive regime destabilization  (family: moral-hazard-and-bailout-expectation)

**Topics.** risk-and-incentives, compliance

**Keywords.** moral-hazard, systemic-stability, prescriptive-regulation, monitoring

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.