So, despite the odds, one man, Phillip Goldstein, has won his case against the SEC (see Euromoney, March 2005 issue, “Hedge funds register scorn at SEC ruling”). Goldstein argued that the SEC’s 2005 ruling requiring registration for hedge fund managers that had more than $30 million in assets under management and more than 14 US clients was beyond its realm of duty. Congress, not the SEC, he argued, has the power to alter or introduce law. The three judges in a federal appeals court in Washington in June effectively backed this view, finding that the SEC ruling was “arbitrary” and could not be sustained.
It was a judgement that the majority of hedge fund managers would have liked back in 2005 when they were grappling with the prospects of registration costs and intrusive visits by the regulator. (It should be noted, though, that virtually none of them had the courage to back Goldstein’s case.) But now that the case is won, there are a few disgruntled voices.
For a start, although not as many hedge funds registered by the February 2006 deadline as the SEC would have liked – estimates run just below 1,000 – those that did so spent a lot of time and money employing or training staff to deal with registration, sending them to conferences and filling in paperwork.