Publications

Removing the Shroud of Secrecy

September 2006
Institutional Investor's Alpha

In Goldstein v. SEC, the U.S. Circuit Court of Appeals for the District of Columbia Circuit in late June vacated the Securities and Exchange Commission's rule requiring most hedge fund advisers to register under the Investment Advisers Act. Section 203(b)(3) of the Advisers Act requires an adviser to register if it has more than 14 clients and holds itself out generally to the public as an investment adviser. The SEC's hedge fund registration rule required hedge fund managers to "look through" the funds they advised and count the investors in the funds as clients. In Goldstein the court determined that the funds, rather than the investors, were clients of the adviser for purposes of the registration test. The SEC has announced it will not appeal the decision and that it will address a number of the "unintended consequences" of Goldstein by SEC staff action.