California drops proposal to register hedge funds

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California’s Department of Corporations has withdrawn its controversial proposal to require registration of hedge funds with offices or clients in the state.

Introduced in September 2007, the proposal would have re-imposed mandatory registration after the U.S. Securities and Exchange Commission’s attempt to do so was invalidated in 2006 by the so-called Goldstein decision, in which the courts sided with a hedge fund manager who opposed the rule.

“My original proposal would have dealt with a gap in regulation of these types of investment advisers between the SEC and the State of California,” said Preston DuFauchard, sole Commissioner of