In two separate votes at a meeting today, one split and one unanimous, the Securities and Exchange Commission decided to require the registration of most hedge funds, and to propose new rules for companies seeking an initial public offering. Chairman William Donaldson and two Democratic commissioners voted against the two Republican commissioners to push through the tough new rules for hedge funds, which had previously been only lightly regulated. Traditionally investment vehicles for the extraordinarily wealthy, hedge funds have grown enormously over the past few years, both in terms of their assets under management and the types of investors involved. Of particular concern to many are the number of banks and pension plans that have turned to hedge funds as stock market returns have diminished from their dot-com highs. SEC registration would impose new record-keeping and information-sharing burdens on the industry, and require them to allow SEC inspections. Industry groups have complained that the new rules would hit funds with unfairly heavy costs for registration and compliance personnel, among other things. The other, unanimous decision by the commissioners was to propose changes for IPO-seeking companies that would, in some cases, eliminate the 70-year-old "quiet period" before the offering when they must remain incommunicado. "Well-known, seasoned issuers" would be allowed to distribute much more information than they currently can, in the form of media interviews, press releases and even possibly advertising. The proposal will now be sent out for public comment, with opinions required with 75 days of the proposal's publication in the Federal Register.

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