Funds and Investment Funds

Copyright 2006 Stephen Furnari

Funds Mutual Vanguard Small, independent hedge funds were given a boost on Friday by a favorable court decision that struck down a controversial rule requiring hedge funds to register with the Securities and Exchange Commission. Notwithstanding the decision, many fund advisers are expected to continue to register voluntarily in order to attract and retain institutional investors.

Since 2004, the S.E.C. has sought to regulate this industry and has been repeatedly rebuked by the D.C. Court of Appeals. the Investment Advisers Act of 1940 which requires broker registration when more than 15 clients are involved but if the fund has less than one hundred investors, the demanding Investment Company Act of 1940, regulation is not required either. The S.E.C., with the criticisms of Wall Street and without the help of the courts or Congress, has instead sought to redefine the word client in order to broaden their regulatory powers.

Funds Mutual Top In 2004, the SEC amended one of the key exemptions fund advisers relied on to avoid registration with the SEC as an investment adviser. Previously, fund managers with fewer than 15 clients were not required to register as an investment adviser. Under the old rule, each fund the adviser managed was considered a "client", regardless of the number of individual investors in the fund. In most cases, managers that advised fewer than 15 funds could avoid registration as an investment adviser.

High Yield Plus Fund Inc. (the Fund) is a diversified, end management investment company. The Fund's primary objective is to provide a high level of current income to shareholders. It seeks to achieve this objective through investment of at least 80% of its investable assets in publicly or privately offered, rated securities of comparable quality. As a secondary investment objective, the Fund will seek capital appreciation, but only when consistent with its primary objective. The Fund has agreements with, among others, Wellington Management Company, LLP (the Investment Adviser) and Prudential Investments LLC (the Administrator). The Investment Adviser makes investment decisions on behalf of the Fund.

Funds Market Money Under the 2004 rule amendment, the SEC changed the definition of a "client" of an investment adviser to mean the individual investors in the funds it managed. Thus, with few exceptions, the 2004 rule amendment forced fund advisers managing investment funds with 15 or more investors (and more than $30 million in assets) to register as an investment adviser. Since the adoption of the 2004 rule amendment, 1,260 new fund advisers have registered with the SEC. Last week's appeals court decision strikes down the 2004 rule amendment, which will relieve many smaller funds from the burden and expense of investment adviser registration, compliance and random SEC inspections.

Hedge Funds Scooping up Talent Many of the biggest hedge funds are still flush with cash, despite market turmoil, according to the FT. The report also notes that hedge funds “look increasingly appealing for staff at investment banks facing falling bonuses, a clampdown on expenses and widespread job losses.”

Funds In Investing Mutual This is a big development in U.S. hedge fund regulation, and a sign of a potential backlash against the SEC's attempt to expand its regulatory reach in this area. However, no one expects the SEC to close the door completely on hedge fund regulation. And while some advisers may elect to de-register to avoid the cost of compliance, many funds are expected to take a "wait-and-see" approach in anticipation the SEC's potential enactment of new rules in reaction to the court's decision.

Hedge funds, which tend to fly well below of the regulatory oversight of the S.E.C. still present problems for investors in ways Mr. Aguirre suggests that influence company stock prices. Interest, or lack of it, in the information stemming from Aguirre' regulated hedge fund industry needs to continue to draw investors to the fold. Should the S.E.C. be given the power to regulate these private funds, whose manipulation of the markets could have an affect on investors far removed from their secretive pursuits

Fidelity Funds Mutual Notwithstanding the court decision, many institutional investors appreciate the transparency that registration affords investors, and will continue to require registration as part of their investment criteria. In the fund business, and especially for small, independent funds, institutional investors are the Holy Grail. Accordingly, many advisers will continue to voluntarily register despite the burden of compliance.

Blue Chip Value Fund, Inc. (the Fund) is a diversified, end management investment company, registered under the Investment Company Act of 1940. The Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in equity securities of large companies with headquarters in the United States, such as those included in, or similar in size to those included in, the S and P 500 Index. Denver Investment Advisors LLC (DIA) acts as the Fund's investment adviser, while ALPS Mutual Funds Services, Inc. and DIA serve as the Fund' administrators.

Funds Load Mutual No While registration is a modest burden for advisers, there are ways for independent advisers to maintain their registration status without having compliance issues overwhelm their operations. In my practice, we help advisers devise cost effective strategies to register and meet their ongoing compliance requirements. We have found that the advisers who work with us are able devote minimal time to the annoyance of compliance and more time on what's really important: raising and managing capital.

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Funds Retirement Stephen Furnari helps investment advisers of small, independent hedge funds develop efficient and cost-effective strategies to address start-up and compliance issues, which enable them to devote minimal time to the annoyance of registration and compliance, and more time on what's really important: raising and managing capital. To schedule an appointment, email his assistant, Inga Eilenkrig, at ieilenkrig@furnarilevine.com, or go to http://www.furnarilevine.com .

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