NASDR to Run Investment Adviser Database

Febuary 15, 1999

The Securities and Exchange Commission (the "SEC") has announced that the National Association of Securities Dealers Regulation, Inc. (the "NASDR") will run an electronic database for the registration of investment advisers. The database will be the equivalent of the NASDR's Central Registration Depository ("CRD") currently in use for the registration of broker-dealers.

In 1996 Congress passed the National Securities Markets Improvement Act (the "1996 Act") providing for the redistribution of regulatory authority between state and federal securities regulators. Among other things, the 1996 Act gave the SEC exclusive authority to register investment advisers meeting certain criteria, most notably those with assets of $25 million or more under management. Working with the North American Securities Administrators Association ("NASAA") on behalf of state securities administrators, the SEC has designated NASDR to run an electronic database for the registration of investment advisers at the state and federal levels.

According to the SEC's Division of Investment Management, the SEC will adopt a rule directing investment advisers to comply with the filing rules of the National Association of Securities Dealers, Inc. when registering in the new database. The information in the new database will be available to the public through the Internet and is expected to be useful for investors selecting investment advisers or financial planners. According to the SEC, NASDR will perform only "administerial (sic) duties" and will not have any regulatory responsibilities whatsoever. It is unknown when the new procedures may be implemented.

RELATED NEWS - NASAA CONSIDERING LESS RIGOROUS IA EXAM

NASAA may allow certain investment advisers to take a less rigorous competency exam as part of the NASAA's development of new entry-level exams for state-registered investment advisers. The new exams will likely replace the existing Series 65 and 66 exams, which are designed for both investment advisers and broker-dealers. The less rigorous investment adviser exam may be adopted for advisers who have already passed the Series 7 exam, which focuses on broker-dealer laws and practices.

To discuss other issues relating to hedge funds and their investment managers, contact Howard A. Neuman at (212) 818-9200 .