In a move aimed at increasing transparency and protecting investors, the Securities and Exchange Commission (SEC) announced new rules Thursday mandating that hedge funds and private equity firms file detailed quarterly reports on their investment strategies, fees, and returns. The regulations, approved by a 3-2 vote along party lines, are among the most significant updates to private fund oversight in decades. The new disclosure requirements will force firms managing more than $500 million in assets to submit standardized forms that break down portfolio holdings, leverage ratios, and performance metrics. SEC Chair Gary Gensler emphasized that the changes are designed to "level the playing field" for institutional and retail investors alike. "Private funds have grown tremendously in size and influence," Gensler said at a press conference. "Greater transparency promotes competition and protects investors by shedding light on risks that otherwise remain hidden." However, critics argue the rules could have unintended consequences. Industry groups like the Managed Funds Association claim the regulations will increase compliance costs and discourage innovation. Several hedge fund managers warned that the requirement to reveal investment strategies could erode their competitive edge. Markets reacted sharply to the announcement. The S&P 500 fell 1.2% on Thursday, with financial sector stocks leading the decline. Shares of major asset managers such as Blackstone, Apollo Global Management, and KKR dropped between 3% and 5% amid concerns about tighter regulatory scrutiny. Analysts noted that the new rules could cool institutional appetite for high-risk, high-reward strategies, leading to reduced liquidity in certain asset classes. "This is a significant shift," said Alicia Levine, Chief Investment Strategist at BNY Mellon Wealth Management. "Investors are recalibrating expectations for returns and risk across the board." The SEC's move comes amid broader efforts by the Biden administration to rein in what it perceives as systemic risks in the financial system. Additional proposals targeting high-frequency trading and digital assets are reportedly in the pipeline, suggesting that regulatory headwinds could remain a key market theme heading into the second half of 2024.