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News January 29, 2007 Issue

Hedge Fund Managers Face Deregistration Deadline This Week

Reminder to hedge fund managers that have been on the fence about whether to remain SEC-registered: To take advantage of two aspects of the post-Goldstein transitional relief granted by the SEC in its August 10, 2006 letter to the ABA Subcommittee on Private Investment Entities, you’ve got to deregister by February 1.

If your advisory firm registered with the SEC because it was required to do so by the now-defunct hedge fund rule, and, while registered, held itself out as an adviser and/or had more than 14 clients, as long as your firm deregisters by February 1, it can go right back to relying on the Section 203(b)(3) exemption without regard to the 12-month lookback for determining the number of clients. Of course, your firm must otherwise be eligible for the 203(b)(3) exemption: it must no longer be holding out and must have 14 or fewer clients at the time of deregistration.

Moreover, per the relief in the ABA letter, a firm that deregisters by February 1 in reliance on Section 203(b)(3) need not file a balance sheet with their Form ADV-W.