After months of speculation on how exactly hedge fund regulation for investment advisers would transpire, some lawyers have begun to question whether it will happen at all. They point to the internal rift at the Securities and Exchange Commission and to the shifting political landscape as indicators of stalled regulation of hedge funds. "[It’s] registration is withering on the vine," said Michael Tannenbaum, partner at Tannenbaum Helpern Syracuse & Hirschtritt in New York. Seth Taube, partner at Baker and Botts in New York, said he does not expect hedge fund registration to happen. "The tide has turned," he said. John Heine, SEC spokesman, said he had not seen any indications that the Commission’s stance had changed.

SEC Chairman William Donaldson’s push for hedge fund registration is a political move, but the political clout for such a move is rapidly diminishing, said David Goldstein, a partner at White & Case. This was echoed by Harry Davis, a partner at Schulte Roth & Zabel in New York, who said that with the SEC preoccupied with mutual fund scandals, it is not lost on anybody that the notion of requiring IAs to hedge funds to register could be fading away. Davis also mentioned lack of resources, and inadequate support within the SEC. Two commissioners, Paul Atkins and Cynthia Glassman, publicly opposed the idea of hedge fund registration in the fall (CR, 10/6). These had precluded Donaldson from receiving unanimous support for registration, without which he would be loath to proceed, Goldstein added.

(Compliance Reporter)