SEC Votes 3-2 To Register Hedge Funds; Small Firms Are Still Exempt.(A)

Byline: KEN HOOVER

A divided Securities and Exchange Commission voted Tuesday to extend the grip of government regulation to the fast-growing hedge fund industry.

Beginning in 2006, hedge fund managers will be required to register as investment advisers and be subject to on-site inspections by SEC examiners.

The commission staff argued that their rapid growth, important role in the financial markets, evidence of fraud and the trend toward marketing themselves to middle-class investors made regulation necessary.

But the 3-2 vote revealed the deep divisions on the subject. The dissenters, Commissioners Cynthia Glassman and Paul Atkins, both …