California Department of Corporations Leaves IA Exemption in Place

On May 1, 2008, the California Department of Corporations (CDC) refused to amend Rule 260.204.9 a rule which exempts California based investment advisers from state registration requirements if such investment adviser has at least $25 million of assets under management. The proposed amendment would have required all California based, non-SEC registered, investment advisers to register with the CDC. The proposed amendment was an attempt by the CDC to require the registration of certain hedge fund managers who are no longer subject to federal regulation due to the D.C. Circuit Courts decision in Goldstein v. SEC. The CDC explained its decision to reject the proposed amendment by citing public opposition and ongoing actions of federal regulators that could result in regulation for those investors described above. The CDC stated that approving the proposed amendment would be premature, and did not rule out instituting the amendment in the future.