SEC Commissioner Christopher Cox said August 7 that the SEC will not appeal the D.C. Circuit Court of Appeals’ decision in Goldstein v. SEC, which struck down the SEC’s hedge fund manager registration rule.
Instead, Cox said, the SEC is moving aggressively on an agenda of rulemaking and staff guidance “to address the legal consequences from the invalidation of the rule.” Among the significant new proposals, he said, will be a new anti-fraud rule under the Investment Advisers Act that would have the effect of ‘looking through’ a hedge fund to its investors. This would reverse the side effect of the Goldstein decision that the anti-fraud provisions of the Act apply only to ‘clients’ as the court interpreted that term, and not to investors in the hedge fund.
Hedge funds today remain subject to SEC regulations and enforcement under the antifraud, civil liability, and other provisions of the federal securities laws, Cox said. “The SEC will continue to vigorously enforce the federal securities laws against hedge funds and hedge fund advisers who violate those laws,” pledged Cox. “Hedge funds are not, should not be, and will not be unregulated.”
…According to Barclays Global Investors, exchange traded fund flows surged in June as investors poured $9.7 billion into ETFs, following a contribution of $7.1 in May. Total U.S. ETF funds reached $340.5 billion as of the end of June; as of the end of June 2005, the total was $243.0 billion.