Judges on the U.S. Court of Appeals in Washington on Friday took lawyers for the Securities and Exchange Commission to task over some language included in the regulator's controversial hedge fund registration rule and it might be good news for the plaintiff.

Phillip Goldstein, managing partner of the New York hedge fund Opportunity Partners, is suing to have the rule overturned. Goldstein claims the SEC is overstepping its jurisdictional boundaries by making it mandatory that hedge funds to register like any other investment adviser. He also believes that the SEC misunderstood a law that places hedge funds under exemption in regards to registering, and furthermore, he claims that the SEC made procedural mistakes when adopting the rule.

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