WASHINGTON (HedgeWorld.com)–D-Day–or, if you will, R-Day–has passed, and the Securities and Exchange Commission now has 2,102 hedge fund advisers under its watch.

Nearly half (934) of those hedge fund managers registered with the agency over the course of 2005 and early 2006 to meet the Feb. 1 deadline. SEC staff members processed hundreds of applications in the days leading up to registration, rushing an agency that generally handles 100 registrations per month rather than each day.

The influx of investment adviser applications may have strained but not snapped an already stretched regulatory body. While the SEC had told the American Bar Association that firms that hadn’t filed an application by early January were facing the possibility of non-compliance, agency officials say they plowed through all the applications and after alerting some managers of deficiencies reconciled all the applications on file.

Firms that fail to meet their regulatory obligation could face enforcement action, said Robert E. Plaze, associate director of the SEC’s Division of Investment Management.

The legality of the registration requirement is still in question, however, as long as a court challenge stays open. Hedge fund manager Phillip Goldstein’s case against the SEC was argued on Dec. 9. He’s challenged the validity of the SEC’s “look-through” provision, which counts investors and not just a fund’s general partner in order to count clients to see if they number more than 14–a threshold that forces an manager to register with the commission.

Judges at the U.S. Court of Appeals for the District of Columbia are said to have expressed some skepticism over SEC’s arguments for the rule change during the Dec. 9 arguments.

Debate continues over the obligations of managers outside the United States.

Overseas entitities were required to register with the SEC if they had more than 14 clients based in the United States. The Alternative Investment Management Association, an organization that has many offshore hedge fund advisers within its membership, claims that 90% of its membership already reported to regulators in some jurisdiction before the SEC registration went into effect.

In their comments on the SEC hedge fund rule, AIMA officials said they didn’t believe that offshore advisers subject to regulation in other jurisdictions should be required to duplicate registration in the United States. AIMA said that many managers already run funds that may include investments from other European funds or pension funds that are already regulated.

Of the 3,500 general partners that the database keeper Strategic Financial Solutions says constitute the global manager total, roughly 75% are U.S.-based firms, according to Meredith Jones, director of market research at SFS.

Another nagging question is how many managers chose not to comply with registration by increasing their lock-up provisions to two years.

SBarreto@HedgeWorld.com

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