There may be something lurking in the hedges; not a snake, but something with just as deadly a bite, according to financial market regulators. It's systemic risk. The Obama Administration continues its campaign for financial market regulatory reform, on Thursday submitting legislation that would mandate registration of hedge funds. The legislation calls for advisers to hedge funds and other private capital pools  like private equity funds and venture capital funds to register with the Securities and Exchange Commission (SEC). "At various points in the financial crisis, de-leveraging by such funds contributed to the strain on financial markets," Treasury Department officials said in a fact sheet on the legislation. "Because these funds were not required to register with regulators, the government lacked the reliable, comprehensive data necessary to monitor funds' activity and assess potential risks in the market." And that, after all, is what transparency is all about. By taking a weed whacker to the murky world of hedge funds and instilling some transparency in the system, the administration aims to protect investors from potential fraud and abuse as well as give regulators the means to track potential systemic risk. The administration's legislation would consolidate current loose standards for registration, mandating all investment advisers with more than $30m of assets under management to register with the SEC. The advisers thereafter would be subject to reporting requirements regarding assets, leverage and off-balance sheet exposure of their advised private funds. They would also be subject to disclosure requirements to investors, creditors and counter-parties. The legislation would mandate conflict-of-interest and anti-fraud prohibitions, ongoing SEC examinations and comprehensive compliance programs. "This information would help determine whether systemic risk is building up among hedge funds and other private pools of capital, and could be used if any of the funds or fund families are so large, highly leveraged, and interconnected that they pose a threat to our overall financial stability and should therefore be supervised and regulated as Tier 1 Financial Holding Companies," the Treasury's fact sheet concludes. Write to Diana Golobay.