Just days after the Securities and Exchange Commission ratified a plan that would require hedge fund firms to register as investment advisors, Chairman William Donaldson had to defend his decisive vote to skeptical Republican senators amid not-so-new news that Federal Reserve chairman Alan Greenspan is also against the plan.

At a Washington hearing Thursday, Republican Senators questioned the plan, which would force all companies with hedge fund assets of more than $25 million or client bases of 15 or more to register with the SEC, thus dishing out stricter rules and more examinations.

Greenspan will testify next week at another Senate Banking Committee meeting, and Chairman Richard Shelby (R-Ala.), who is also opposed to the plan, said the issue will be presented to Greenspan. Previously, the Fed Chairman has said that market liquidity could be harmed by stricter hedge fund regulation.

Sen. Mike Enzi (R-Wyo.), told Donaldson that the plan may be focusing on the wrong type of investor. "With the hedge fund proposal, I believe that the SEC may be tempted to stretch its resources too thin so that it can protect the Warren Buffetts of the world at the expense of ordinary, retail investors," Enzi said.

But Sen. Jon Corzine (D-N.J.) disagreed. "If adopted, these rules will improve the public transparency, accounting and record-keeping, and regulatory scrutiny of hedge funds in the interest of investor protection, market stability and the prevention of fraud and abuse," said Corzine, in a statement on his Web site.

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