WASHINGTON, Dec 9 (Reuters) – U.S. appeals court judges on Friday in open court questioned the legal basis of a new Securities and Exchange Commission rule that will force hedge fund advisers to register with the agency.
Two judges of the U.S. Court of Appeals for the District of Columbia circuit grilled an SEC attorney over the legal meaning of the word “client” in the new rule, set to take effect in February, and in prior statutes.
The meaning is key because the SEC rule closes a loophole that had allowed hedge fund advisers to escape SEC registration by counting each fund under their management as an individual client, not each fund’s individual investors.
