The U.S. Securities and Exchange Commission has indicated that it will not appeal a court ruling that struck down its proposed hedge fund registration rule.

SEC chairman Christopher Cox issued a statement concerning the agency’s decision not to seek a review of the decision of the U.S. Court of Appeals in Phillip Goldstein, et al. v. Securities and Exchange Commission, and not to petition the U.S. Supreme Court. In June, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit unanimously struck down the SEC’s hedge fund adviser registration rules under the Investment Advisers Act.

“The commission’s solicitor and general counsel have concluded that, since the appellate court’s decision was based on multiple grounds and was unanimous, further appeal would be futile and would simply delay and distract from our goal of advancing investor protection,” Cox said.

“Instead, the commission is moving aggressively on an agenda of rulemaking and staff guidance — some of which may be issued as early as this week — to address the legal consequences from the invalidation of the rule,” he added.

“Among the significant new proposals will be a new anti-fraud rule under the Investment Advisers Act that would have the effect of ‘looking through’ a hedge fund to its investors. This would reverse the side effect of the Goldstein decision that the anti-fraud provisions of the Act apply only to ‘clients’ as the court interpreted that term, and not to investors in the hedge fund. At my direction, commission staff are also considering whether we should increase the minimum asset and income requirements for individuals who invest in hedge funds,” he explained.

“In addition, our staff guidance can be expected to address the grandfathering, transition and other miscellaneous relief necessitated by the vacating of the rule. This will help to eliminate disincentives for voluntary registration, and enable hedge fund advisers who are already registered under the rule to remain registered,” Cox noted.

“Finally, notwithstanding the Goldstein decision, it is important to point out that hedge funds today remain subject to SEC regulations and enforcement under the antifraud, civil liability, and other provisions of the federal securities laws,” he said. “The SEC will continue to vigorously enforce the federal securities laws against hedge funds and hedge fund advisers who violate those laws. Hedge funds are not, should not be, and will not be unregulated.”