Federal Court of Appeals Strikes Down SEC Requirement that Certain Hedge Fund Managers Register as Investment Advisers

On June 23, 2006, a federal appellate courtinvalidated the Securities and Exchange Commission (theSEC or the Commission) rule requiring certain hedge fund managers to register as investment advisers. At issue was the Commission’s adoption of an amendment to a safe harbor (Rule 203(b)(3)-1) that had previously allowed most hedge fund advisers to count each of their hedge funds as a single client.