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SEC To Consider Adoption of Hedge Fund Antifraud Rule

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  • John M. Baker
    The Securities and Exchange Commission has announced that it will consider adoption of an antifraud rule applicable to advisers to pooled investment vehicles
    Message 1 of 1 , Jul 4, 2007
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      The Securities and Exchange Commission has announced that it will
      consider adoption of an antifraud rule applicable to advisers to
      pooled investment vehicles at an open meeting on Wednesday, July 11.
      According to the announcement, the new rule would prohibit advisers
      to certain pooled investment vehicles from making false or
      misleading statements to, or otherwise defrauding, investors or
      prospective investors in those pooled vehicles. The rule is needed
      because of the court's opinion in Goldstein v. SEC, 451 F.3d 873
      (D.C. Cir. 2006), which implied that the existing antifraud
      provisions of the Investment Advisers Act of 1940 do not protect
      investors in hedge funds.

      The original rule proposal included a highly controversial increase
      in the accredited investor standard for hedge funds, which apparently
      will not be considered at this meeting. It is not clear whether the
      new rule will extend to registered investment companies, as did the
      original proposal. There does not appear to be any regulatory gap
      for registered investment companies, and that aspect of the proposal
      was resisted by the fund industry. The SEC announcement reads in
      full:


      OPEN MEETING - WEDNESDAY, JULY 11, 2007 - 10:00 A.M.

      The subject matter of the open meeting scheduled for Wednesday,
      July 11, will be:

      The Commission will consider whether to adopt a new antifraud rule
      under Section 206 of the Investment Advisers Act of 1940. The new
      rule would prohibit advisers to certain pooled investment vehicles
      from making false or misleading statements to, or otherwise
      defrauding, investors or prospective investors in those pooled
      vehicles.


      For my more detailed post on the original proposal, see

      http://groups.yahoo.com/group/FundLaw/message/1113



      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1220 19th Street NW, Suite 600
      Washington DC 20036
      202.419.8413
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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