The long arm of American law is reaching halfway around the world in an attempt to control a secretive but rapidly expanding area of the investment industry. A new rule by the United States Securities and Exchange Commission came into effect on Wednesday requiring hedge fund managers to register with the regulator so it can monitor the more than US$1 trillion industry which has until now been largely unregulated in the US. While US funds with less than US$30 million under management are not required to register, foreign funds, such as those operating from Hong Kong, must register if they have 15 or more US-based investors, regardless of how much money the manager is responsible for. Hedge fund managers say the new rule will raise their management costs and that funds based in places such as Hong Kong or Britain, where regulators already monitor managers operating in their jurisdictions, should be exempt. 'These funds are already registered in Hong Kong and I think most people would view Hong Kong as on par with other well-regarded regulators. In that regard, people find the philosophy a little hard to stomach,' said Christophe Lee Kin-ping, chief executive of SHK Fund Management and chairman of the Hong Kong chapter of the Alternative Investment Management Association. 'It's more work, more time and more fees for lawyers.' Rising interest from retail investors, hedge funds' growing clout in global capital markets and fears that they could be used for money laundering are forcing regulators to lay down the law. Registered managers are subject to random SEC inspections as part of the new rule. According to Reuters, the SEC expects about 1,000 of the 8,000 hedge fund managers around the world to register. A large portion of global institutional money pouring into hedge funds comes from the US, particularly from pension funds, prompting many foreign managers to seek clients there and giving the SEC the influence it needs to introduce the new regulation. Karl Hurst, managing director of HT Capital Management, said his fund had opted not to get registered because it was not pursuing US clients. 'We are a boutique fund house and we don't have the resources that would be required for the ongoing compliance. To actually register with the SEC just takes a few minutes online, it's very easy but the ongoing compliance issues are very draconian and you can't afford to slip,' Mr Hurst said. 'We are already registered with the Securities and Futures Commission [in Hong Kong], we've jumped through hoops of fire with the SFC - I'd like to think that might be enough.' Mr Lee said few Hong Kong funds were likely to try using a loophole in the new rule which says that managers that 'lock up' their investors' money for two or more years or refuse to take new money to avoid registration. The exemption was designed to protect private equity and venture capital funds from the rule but some managers are using it to avoid registration. Hedge funds have attracted increasing attention in Hong Kong in recent years as more managers from the US and Europe open offices here in search for Asian investment opportunities. Hong Kong has also been a leader in creating rules to allow retail investors to put their money into hedge funds which traditionally were the domain of rich individuals and institutional investors.