The Investment Advisers Act: the need for clarity in the post‐Goldstein era

Abstract

Purpose

This paper seeks to discuss regulatory clarifications provided by the SEC since the June 2006 DC Court of Appeals decision in Goldstein v. Securities and Exchange Commission disrupted the SEC's hedge fund registration framework and other recently promulgated investment adviser practices and procedures.

Design/methodology/approach

Describes recent legislative efforts to reexamine the hedge fund industry and the SEC's response letter on several important issues raised by the American Bar Association Subcommittee on Private Investment Entities; highlights the need for the SEC and/or legislatures to address numerous issues raised by the Goldstein decision.

Findings

The SEC's response letter to the ABA Subcommittee on Private Investment Entities provided clarification on recordkeeping requirements for performance information, performance‐based compensation, and deadlines for distributing audited financial statements of funds‐of‐funds to investors. Further actions to be taken by the SEC and/or legislatures are still uncertain on issues such as the applicability of the antifraud provisions of the Advisers Act, the investment adviser accreditation threshold for “accredited investors,” liberalization of the manner of offering restrictions, increasing financial tests for individuals qualified to invest in hedge funds, and the necessity for general solicitation restrictions.

Originality/value

A useful update on the continually changing regulatory environment for hedge funds by an attorney who specializes in investment fund regulation.

Citation

Wider, J. (2006), "The Investment Advisers Act: the need for clarity in the post‐Goldstein era", Journal of Investment Compliance, Vol. 7 No. 4, pp. 12-15. https://doi.org/10.1108/15285810610719907