Unless the Securities and Exchange Commission – or Congress – moves quickly, the SEC may start bleeding hedge funds. The Wall Street Journal reports that since a federal appeals court struck down the hedge fund registration rule three weeks ago, 10 HF managers have filed to deregister. SEC Chairman Christopher Cox said he wants to move quickly on possible alternatives, one of them being emergency legislation giving the agency the power to regulate hedgies. But until there is something concrete, the exodus will remain in motion. The HF rule was Cox predecessor William Donaldson’s baby, and the views of freshly-minter commissioner Kathleen Casey, former staff director of the Senate Banking Committee, are still unknown.
According to the Journal, since no explanation is necessary for deregistering, it isn’t clear why the hedgies are leaving. Some could be closing shop, such as New York-based Saranac Capital, that fund being the largest to deregister thus far. Another, California-based Nickel Capital, is stepping out because it doesn’t meet the $25 million AUM requirement. Firm managing partner Mark Langner told the paper his firm is not likely to register again even after it reaches that amount because of the expense involved. He says, however, the firm will voluntarily stick with some of the SEC requirements, such as maintaining a compliance manual. After all, Langner tells the Journal, “There’s no reason to undo those things.”