Most commonly, hedge funds are not required to register as an investment company with the SEC, in reliance usually upon an exemption pursuant to either, Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940 (the “Act”). Section 3(c)(1) of the Act, in part, provides an exemption from the Act’s registration requirement for an investment company whose securities are owned by not more than 100 “persons” at any given time. Hedge fund managers most commonly rely upon the exemption from registration as an investment company available under Section 3(c)(1) of the Act. Section 3(c)(7) of the Act, in part, exempts investment companies from the Act’s registration requirement without limitation as to the number of its beneficial owners as long as the securities are owned exclusively by “qualified purchasers” as defined in the Act. A hedge fund operating pursuant to an exemption under either Sections 3(c)(1) and 3(c)(7) of the Act, however, may not make any public offering of its securities under the Securities Act of 1933. There are numerous restrictions against advertising and general solicitation by hedge funds relying on either the Section 3(c)(1) or Section 3(c)(7) exemption, and managers should exercise proper caution in their selling efforts to ensure that the fund’s exempt status is never compromised.