SEC Tells Private Equity Firms to Report on Litigation Finance

Big private equity firms must privately report on the bets they make in the multi-billion-dollar litigation finance market under regulations the SEC approved Wednesday.

The Securities and Exchange Commission voted 3-2, along party lines, to adopt the requirements as part of rules to better police private equity firms and hedge funds, which operate in relative darkness. The rules also oblige large hedge funds to confidentially tell the SEC about major losses within three days, among other demands.

Private equity firms, which generally focus on long-term investments, could previously sidestep specific disclosures about litigation finance under commission rules from 2011. The ...