Subject: File No. S7-30-04
From: Paul Smith

September 15, 2004

I would like to respectfully express my opposition to the proposed rule requiring certain hedge fund managers to register under the Investment Advisers Act.

I do not believe that the hypothetical benefits of mandatory registration justify the costs the rule would impose on hedge fund investors, financial markets in general or U.S. taxpayers. Further, I concur with Federal Reserve Chairman Alan Greenspans view that the current system of voluntary registration is appropriate, and disagree with the proposed expansion of the SECs jurisdiction in this arena beyond the scope of its legislative mandate.

The large institutions, wealthy individuals and other sophisticated investors who qualify to invest in hedge funds are capable of evaluating the merits of investing with registered and unregistered advisers, just as they may choose to invest in registered or unregistered securities and registered or unregistered funds.

The SEC should not substitute its own views about the benefits of regulation in this instance, for the judgment of these highly sophisticated investors who are perfectly capable of evaluating the relative merits of these investment vehicles and their managers, and protecting themselves accordingly.

This new rulemaking will inevitably have multiple negative, and perhaps unintended, consequences. At a minimum, the burdens of this new rule will discourage talented investment managers from starting new hedge funds in the U.S. and will likely deter non-U.S. managers from offering their funds to U.S. investors. There is no compelling argument for placing U.S. interests at such a disadvantage.

Please do not proceed with this proposed rulemaking.