March 6, 2006

Glassman Still Not Sold on Registration

LONDON (HedgeWorld.com)--Cynthia A. Glassman is still lending her voice to the continued criticism of the Securities and Exchange Commission's increased hedge fund oversight.

Last week in London, the Republican SEC commissioner once again questioned whether the SEC was accomplishing its mission of protecting investors through mandatory hedge fund adviser registration. She highlighted what she saw as the "predictable consequences" of registration.

"Overall, I was never quite clear as to what the real objectives of this rule were, so it's very hard to tell whether or not we are accomplishing them," she said in a speech at the Tenth Annual Conference on SEC Regulation Outside the United States.

She repeated her belief that the registration rule, which she and fellow Republican commissioner Paul S. Atkins voted against, was not well thought-out in that officials didn't decide what information was necessary to collect from hedge fund managers in order to monitor them and detect "red flags."

The main problem is that there is no simple way for a manager to check a box on the registration Form ADV, she said. Determination of whether an investment vehicle is a hedge fund or not is drawn from answers to several questions, she said.

According to the SEC, 2,102 hedge fund managers registered as investment advisers as of early February.

A fair number of London-based hedge fund managers registered with the commission, but Ms. Glassman said in her speech that global funds are excluding U.S. investors because they are fearful of surpassing the U.S. investor minimums that would trigger registration with the SEC. She also pointed to U.S. hedge funds that are lengthening lock-up provisions and closing funds as examples of the unintended consequences of requiring hedge fund manager registration.

Contact Bob Keane with questions or comments at bkeane@investmentadvisor.com.

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