| Small, independent hedge funds were given a boost on | | | | adviser.Under the 2004 rule amendment, the SEC |
| Friday by a favorable court decision that struck down | | | | changed the definition of a "client" of an investment |
| a controversial rule requiring hedge funds to register | | | | adviser to mean the individual investors in the funds it |
| with the Securities and Exchange Commission. | | | | managed. Thus, with few exceptions, the 2004 rule |
| Notwithstanding the decision, many fund advisers are | | | | amendment forced fund advisers managing |
| expected to continue to register voluntarily in order to | | | | investment funds with 15 or more investors (and more |
| attract and retain institutional investors.In 2004, the SEC | | | | than $30 million in assets) to register as an investment |
| amended one of the key exemptions fund advisers | | | | adviser. Since the adoption of the 2004 rule |
| relied on to avoid registration with the SEC as an | | | | amendment, 1,260 new fund advisers have registered |
| investment adviser. Previously, fund managers with | | | | with the SEC.Last week's appeals court decision |
| fewer than 15 clients were not required to register as | | | | strikes down the 2004 rule amendment, which will |
| an investment adviser. Under the old rule, each fund | | | | relieve many smaller funds from the burden and |
| the adviser managed was considered a "client", | | | | expense of investment adviser registration, compliance |
| regardless of the number of individual investors in the | | | | and random SEC inspections.This is a big development |
| fund. In most cases, managers that advised fewer | | | | in U.S. |
| than 15 funds could avoid registration as an investment | | | | |