In September, after hedge fund Amaranth collapsed with US$6bn of losses in the futures markets, the House of Representatives approved a bill that would require the President's Working Group on Financial Markets to study the impact of the $1.2 trillion hedge fund industry on the financial markets. If signed into law, the legislation, known as the Hedge Fund Study Act, would require the working group to formulate recommendations regarding hedge fund disclosure requirements.

Although the bill has made no progress in the Senate, hedge-fund managers worry that Rep. Barney Frank (D., Mass.), new Chairman of the House Financial Services Committee, and Senator Chris Dodd (D., Conn.) new Chairman of the Senate's equivalent committee, may be hawkish on the subject of registration since they have both previously worked on legislation to give the SEC greater powers.

Rep. Frank has however been reassuring in recent remarks, telling reporters last week: "Not legislating, no . . . what we need to do is have hearings on hedge funds ... That's without a predisposition to regulate one way or the other." And Senator Dodd told reporters: "I'm not envisioning, legislatively, rushing back into that. Again, I'd rather listen to people who are out there talking about what needs to be done," at a briefing about his priorities as Senate Banking Committee Chairman.

Meanwhile, hedge funds that registered with the SEC last year under legislation that was later struck down by the courts seem to be biding their time before deregistering. A survey carried out by Ernst & Young has found that only 5% of registered funds are intending to de-register, although the funds polled include some who have to register even without the new legislation.

In an interview with Dow Jones, Alan Fish, a partner in Ernst & Young's global financial-services practice and head of the firm's national asset-management adviser practice, said: "While the registration requirement ... wasn't a popular notion, many have stayed registered. A lot of the participants view registration as a price for doing business."