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May 31, 2004

Hedge Fund Registration Planned

By Gregory Bresiger

Follow the bucks. That's what regulators usually do.

So it should have come as no surprise when the securities industry's top cop recently said that the hedge fund industry - an industry with assets that have doubled over the last four years - will no longer be unregulated.

Securities and Exchange Commission Chairman William Donaldson says the regulators must be proactive and should ensure that hedge funds, an $850 billion industry, begin to be regulated through registration.

"You can't have it both ways and criticize us for not being ahead of the curve, but criticize us for taking the first step to register hedge funds," Donaldson said.

Why now? Donaldson, addressing the STA's annual Washington conference, said hedge funds are coming into the mainstream of the retail investment community. He noted that they are often bought today by pension funds.

Donaldson said that he expects the SEC will have a plan to require hedge fund managers to register. He said the plan should be ready within the next three to five months. In a move some might see as designed to reassure the hedge fund business, Donaldson also said that the SEC is uninterested in the structure of hedge funds. "We only are interested in whether they are breaking securities laws," he said.