The hedge fund rule may be gone, but not forgotten are some attending issues, which the American Bar Association raised in a recent letter. In the missive, an ABA subcommittee chaired by Paul Roth suggested that those who registered before the Goldstein decision that tossed the Securities and Exchange Commission rule enjoyed a limited transitional exemption to certain record-keeping requirements. The question at hand was whether the end of the rule also means the end of the exemption, in which case hedge funds that do not comply with the record-keeping requirements could find themselves in hot water. The SEC says, have no fear, the exemption is still here, and in its no-action letter, the agency’s Division of Enforcement – careful to note that its “response expresses the Division’s position on enforcement only and does not purport to express any legal conclusion in the issues presented” – says hedge funds could still rely on the exemption. The no-action letter touched on other issues the ABA letter did not address, one of them being whether hedge funds that held themselves out to be investments advisers or had more than 14 clients would be forced to remain registered. The SEC says no, and hedge fund advisers have until Feb. 1, 2007, to withdraw their registrations even if for now they consider themselves investment advisers.
