As reported today on FINalternatives, smaller hedge funds would have to register with the Securities and Exchange Commission under an amendment to the financial regulation reform bill making its way through Congress.

In the current bill, hedge funds with less than $100 million in assets are not required to register. Nor are private equity or venture capital funds. Sen. Jack Reed (D-R.I.) wants to change that.

“Hedge funds, private equity and venture capital funds have played an important role in providing liquidity to our financial system and improving the efficiency of capital markets,” Reed told Politico. “But as their role has grown so have the risks they pose. This amendment will shut down loopholes and provide the SEC with long-overdue authority to examine and collect data from this key industry.”

Reed’s amendment would require all hedge, private equity and venture capital funds to register. Those with more than $100 million would have to do so with the SEC; those with less could choose to register with state regulators.

Meanwhile, while Reed has been touting his registration plan, members of the alternative investment industry have been making the case against requiring small funds to register.

“Smaller funds pose no systemic risk to the financial sector. They are small businesses that cannot operationally afford the expense associated with being registered,” said Mitch Ackles, a spokesman and director for the Hedge Fund Association, which represents hedge fund managers and investors. “Over the past few years, smaller hedge funds have shut down right and left, and not one of them represented any risk systemic risk whatsoever.”

Ackles told FINalternatives that the HFA is not opposed to encouraging smaller hedge fund firms to register, but “it is the requirement we are against,” he said, adding that if the smaller firms are forced to register?which can cost over $100,000?”it will impede job creation and industry growth.”