Before being tabbed as Securities and Exchange Commission chairman in February 2003, William Donaldson was known as anything but liberal. After all, he worked in the Nixon administration and garnered his current position during the tenure of George W. Bush. But the way he has voted lately, it would be hard to differentiate him from the two Democratic SEC commissioners.

In a vote on whether hedge funds should be scrutinized more closely, the Commission’s two Democrats voted yes, while the two Republicans, predictably, voted no. Donaldson’s deciding vote – on line with the Democrats for stricter enforcement – marked the second time in less than a month that the five members voted that way. On June 23, Donaldson and the Dems outweighed the Republicans by the same score, making it mandatory for mutual fund boards to have independent chairmen.

If the proposed rule is adopted, more hedge funds will have to register as investment advisors with the SEC. In pre-emptive action, many hedge funds have voluntarily registered with the Commission over the past few months.

Paul Schott Stevens, president of the Investment Company Institute , issued a statement Wednesday commending the SEC’s vote. "As Chairman Donaldson has pointed out, registration of hedge fund advisors would provide the Commission with basic information about the hedge fund industry that the Commission simply does not have today and make possible some degree of oversight of all hedge fund advisors," Stevens said. "This clearly seems worth pursuing in view of the fact that the hedge fund industry has grown to nearly $1 trillion and touches literally all sectors of the capital markets, including mutual funds."

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