SEC Unlikely To Back Down Over Hedge Fund Regulation

by Leroy Baker for LawandTax-News.com

09 June 2005

The appointment of the more liberally-minded Christopher Cox to the position of Securities and Exchange Commission Chairman is unlikely to be the end of the road for hedge fund regulation, which was championed under William Donaldson's tenure, according to industry experts.

"I would not expect a wholesale rewrite of anything," former Sen. John Breaux reportedly told a recent meeting of hedge fund managers.

Following the nomination of California Republican Cox to the role of SEC Chairman, the business and investment community in the US are expecting a more laissez-faire approach to regulation than under Donaldson, who set about 'cleaning up' the corporate sector following various scandals.

However, Breaux, who is a director of the Managed Funds Association, a lobby group which counts some of the largest hedge funds among its members, went on to forecast that the new SEC regime would, in all probability, seek to strike a balance between those calling for tougher regulation of the hitherto unregulated hedge fund industry in order to protect investors, and those lobbying for a retention of the status quo.

Under the new rules, due to go into effect in February 2006, hedge funds larger than $25 million and with more than 15 investors will have to file as registered investment advisors. The rules affect funds with with a 'lock up' of under two years and require the appointment of chief compliance officers.

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