Law360, New York (February 10, 2006, 12:00 AM EST) -- As the $1 trillion hedge fund industry copes with the new registration requirement from the Securities and Exchange Commission, a well-known loophole for opting out of the rule appears to have been utilized much less than anticipated.

The so-called “lock-up” loophole allows advisers to avoid registering if the hedge funds they serve require investors to commit their funds for more than two years. The caveat was put in place to focus regulation on more liquid funds, which the SEC sees as greater risks to investors, while...
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