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SEC Recommendations on the Horizon?

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WASHINGTON (–In a speech to the National Press Club in Washingon, Securities and Exchange Commission Chairman William H. Donaldson made brief mention of the SEC’s review of the hedge fund industry.

In outlining the current work of the commission, he said: “We are also in the process of reviewing the hedge fund industry, given its extraordinary recent growth, to ensure that investor protection remains paramount.” Mr. Donaldson added that the SEC staff would be issuing recommendations in the next month or two, according to the statement posted on the SEC web site.

The hedge fund investigation has been lengthy, starting last year and encompassing information from 67 managers with US$162 billion in assets under management. The highlight of the SEC’s review was a two-day round table discussion that covered numerous issues that the industry is facing as it grows.

At the conclusion of the hearings many seemed convinced that rules requiring hedge fund managers to register with the SEC were imminent. In wrapping up the two-day event, Mr. Donaldson told attendees that he found the round table to be “a very informative and provocative discussion.” In his closing comments, Mr. Donaldson emphasized that hedge funds do play an important role in the financial industry and that now was an appropriate time to review the hedge fund industry and the regulation of that industry .

He also told the National Press Club that the SEC had implemented a new management structure. Operating out of the office of the chairman, the new organization was put in place to help manage the agency’s expanded agenda and resources. “This structure will help the agency anticipate issues, not just react to them,” he said.

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