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June 23, 2006

Hedge Fund Registration for All?

From the wires this morning:

A federal court struck down a Securities and Exchange Commission rule that requires hedge fund advisers to register with the agency as investment advisers. The U.S. Court of Appeals for the District of Columbia Circuit said the SEC rule is "arbitrary" since it exempts funds with one hundred or fewer investors from Investment Company Act regulations but compels registration for those with fifteen or more investors under another act.

It will be interesting to see how the SEC responds. While optimists might see this as a blow against hedge fund registration, regulators are more likely to take the court's offered path: Register hedge funds as small as having 15 investors.  Ouch.

[Update] The Appeals Court decision is here. Worth reading.

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