Monday, June 30, 2008

Hedge Fund US Regulation

In December 2004, the SEC issued a rule change that required most hedge fund advisers to register with the SEC by February 1, 2006, as investment advisers under the Investment Advisers Act. The requirement, with minor exceptions, applied to firms managing in excess of US$25,000,000 with over 15 investors. The SEC stated that it was adopting a "risk-based approach" to monitoring hedge funds in part because of the massive amount of money collectively invested by hedge funds (over 1 trillion dollars!) The rule change was challenged in court by a hedge fund manager. In June 2006, the U.S. Court of Appeals for the District of Columbia ruled in Goldman v SEC, that the SEC’s regulation was not unfair and arbitrary. It was sent back to the agency to be reviewed.

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