The Securities and Exchange Commission won't challenge a federal appeals court ruling overturning independence rules for hedge fund directors.

The June ruling, from a three-judge U.S. Court of Appeals panel, unanimously struck down the SEC's hedge fund adviser registration rules made under the Investment Advisers Act. In a statement, Chairman Christopher Cox said that the decision not to appeal further was made for a number of reasons -- noting that the court's decision was based on multiple grounds and was a unanimous opinion.

"The commission is moving aggressively on an agenda of rulemaking and staff guidance -- some of which may be issued as early as this week -- to address the legal consequences from the invalidation of the rule," Cox said, in a statement.

The SEC is expected to introduce a new anti-fraud rule under the act that Cox said would have the effect of "looking through" a hedge fund to its investors. SEC staff is also considering whether the minimum asset and income requirements for individuals who invest in hedge funds should be increased.

"The SEC will continue to vigorously enforce the federal securities laws against hedge funds and hedge fund advisers who violate those laws," Cox said. "Hedge funds are not, should not be, and will not be unregulated."

Previously on WebCPA:

SEC Okays Tough Rules for Revealing Top Execs' Pay (July 27, 2006)

Court Tells SEC to Leave Hedge Funds Alone (June 27, 2006)SEC Sends Mutual Fund Rule Out for Comment, Again (June 15, 2006)

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