SAN FRANCISCO, CA (www.HedgeCo.Net) – The Division of Market Regulation (�Division�) of the Securities and Exchange Commission (the �SEC�) has denied a request for no-action assurances from a Floridabased organization to market non-U.S. hedge funds to non-U.S. institutional investors without first registering as a broker-dealer. After having been approached by a number of non-U.S. institutionalinvestors, Dilworth decided to investigate the availability of certain exemptions with the SEC. In a letter dated November 12, 2004, Dilworth Capital Management, LLC (�Dilworth�), requestedassurances that the Division would not recommend enforcement action to the SEC if Dilworth selectively marketed hedge fund interests in offshore hedge funds to large foreign institutional investorsthat are located outside the U.S. and are not U.S. entities. Dilworth indicated that it would be paid from the hedge fund general partner�s management and incentive fees, but would not act as aconsultant or adviser nor receive compensation in that capacity. Dilworth requested that the Division exempt it from the definition of a broker dealer.

The Division declined to assure Dilworth that it would not recommend enforcement action to the SEC if Dilworth engaged in its proposed activities without registering as a broker-dealer. The Division noted particularly that an entity or natural person located in the United States that directs broker-dealer activity towards foreign investors located outside the United States is not exempt from the registration requirements of Section 15 of the Securities Exchange Act of 1934 (the �Exchange Act�). Similarly, an entity or natural person that directs broker-dealer activity exclusively towards institutional investors is not exempt from the registration requirements of the Exchange Act.

Hedge fund general partners and principals that seek to enter into marketing arrangements with unrelated third parties, should be aware that any person who markets the fund or transacts in fund interests in the U.S., must be registered as a broker-dealer with the SEC.

Since receiving the Division�s response to its request, Dilworth Capital has decided to pursue registration as a U.S. broker dealer.

Note:

White & Case LLP represents hedge fund sponsors and advisers, prime brokers, and administrators through its 38 offices in 25 countries around the world. For further information on the White & Case hedge fund practice, contact:

Jay B. Gould, Esq.
White & Case LLP
San Francisco, California 94111
415-544-1112 (O)
310-800-6500 (C)
[email protected]