SEC decides not to appeal hedge fund setback

Christopher Cox, the chairman of the US Securities and Exchange Commission, will not appeal against a court decision limiting the regulator's ability to supervise hedge funds.

The US Court of Appeals ruled in June that the SEC had no power to force US hedge fund advisers to register for supervision. In February this year, the SEC started requiring all advisers with more than $30 million in assets and 15 clients to submit audits and keep records on their clients, but the court decided that this requirement was discriminatory.

Taking the appeal further would have little chance of success, Cox said: "Since the appellate court's decision was based on multiple grounds and was unanimous, further appeal would be futile and would simply delay and distract from our goal of advancing investor protection".

Instead, as Cox outlined to Congress last month (RiskNews, July 26), the SEC will try to repair the inadequate regulatory environment by introducing new rules, including the ability to monitor hedge fund investors for fraud, and possibly increasing the minimum asset and income requirements for investors.

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