SEC Proposes Hedge Fund Adviser Registration Rule

On July 20, 2004, the U.S. Securities and Exchange Commission (the "SEC") proposed new and amended rules and forms (the "Proposal") that would require advisers to certain private investment pools ("hedge funds") to register with the SEC under the Investment Advisers Act of 1940 (the "Advisers Act").¹

As a result of the recent substantial growth and popularity of hedge funds, the staff of the SEC in September 2003 issued a comprehensive study entitled "Implications of the Growth of Hedge Funds" recommending that advisers to hedge funds be required to register with the SEC as investment advisers under the Advisers Act. On July 20, 2004, the Commission by a three to two margin voted for the Proposal, which if adopted would require certain investment advisers to hedge funds that are not already registered under the Advisers Act to register with the SEC.