Grassley Once Again Seeks Hedge Fund Registration

May 24, 2007

Last week, Sen. Chuck Grassley (R-Iowa) introduced legislation -- the Hedge Fund Registration Act -- that seeks to close what he described as a loophole left open in June of 2006 by the Goldstein decision, in which the D.C. Circuit Court of Appeals overturned the SEC rule requiring an investment adviser to a private fund to count the underlying investors of the private fund as clients rather than the funds itself.  The bill would amend the current exemption from registration set forth in Section 203(b)(3) of the Investment Advisers Act of 1940 to provide that, in order to be exempt from registration, investment advisers must during the preceding 12-month period (i) have had assets under management of less than $50 million, and (ii) manage the assets of fewer than fifteen investors, whether individually, in a pooled investment vehicle described in sections 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940, or otherwise.  While the proposal effectively raises the assets under management threshold from $30 million to $50 million (a positive step for small advisers for whom registration could arguably be financially burdensome), the imposition of a client "look-through" will dramatically increase the number of investment advisers that would need to register with the SEC.

For more information about this e-Alert, please contact your regular Sonnenschein attorney.

Click here to read the e-Alert.


These materials should not be considered as, or as a substitute for, legal advice and they are not intended to nor do they create an attorney-client relationship. Because the materials included here are general, they may not apply to your individual legal or factual circumstances. You should not take (or refrain from taking) any action based on the information you obtain from this document without first obtaining professional counsel and you should not send us confidential information without first speaking to one of our attorneys and receiving explicit authorization to do so.

<< Back