Investment Management Regulatory Update

A number of significant developments occurred at the SEC during the first quarter of the year. This Client Alert summarizes some of the more significant developments as they relate to hedge fund and other private fund advisers.

I. Comment Period Ends for SEC Proposed Amendments to the "Accredited Investor" Rules

March 9^th marked the closing of the comment period for the SEC’s proposed amendments to the "accredited investor" rules and the proposed new Advisers Act anti-fraud rule for fund managers. The comment letters received by the SEC are available at: www.sec.gov/comments/s7-25-06/s72506.shtml. Fried Frank submitted a comment letter in which we requested that the SEC permit an employee of a 3(c)(7) Fund or a 3(c)(1) Fund or its investment adviser to invest in the vehicle if he or she is a "knowledgeable employee" as defined in Rule 3c-5 under the Investment Company Act without meeting the applicable accredited investor standard. We also suggested that the SEC propose a