Buzz Archive:
New Section 24.27A SEC Adopts New Anti-Fraud Rule for Private Funds as Proposed

by Goodwin Procter, 1/8/2008

The SEC has adopted a new anti‑fraud rule directed primarily at advisers of private investment funds. The impetus for the new rule was the June 2006 decision of the U.S. Court of Appeals for the District of Columbia (the "Goldstein decision") striking down Rule 203(b)(3)-2 under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), which required many hedge fund managers to register with the SEC as investment advisers. (See Goodwin Procter's June 26, 2006 Hedge Fund Alert, " U.S. Court of Appeals Vacates Hedge Fund Adviser Registration Rule But Withholds Mandate.") The new rule, which was adopted in the same form as originally proposed, is effective September 10, 2007. The rule highlights the SEC's ongoing emphasis on policing the activities of advisers and managers of hedge funds and other private investment funds.