Expanded regulation has made for a more-challenging operating environment for hedge funds.

The private investment vehicles have historically been lightly regulated compared with their institutional asset managers brethren, but in the wake of the 2008-2009 global financial crisis and Bernard Madoff scandal, the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission have pushed for more transparency and accountability.

For hedge funds, the regulatory drive comes at an inopportune time, in that new rules are taxing operations and compliance departments at the same time the investment side of the business faces its own headwinds.

“Market liquidity is not where it was pre-2008 and managers aren’t getting the same credit and the same investor interest that they had access to previously,” said Kay Gordon, an attorney at Drinker Biddle & Reath. “Additional regulatory burdens are certainly a headache for managers and make it more difficult for managers to enter the market and to operate.”

The recent elimination of the CFTC Regulation 4.13(a)(4) exemption, modified registration requirements under the Investment Advisers Act of 1940, OTC derivatives regulation, and the SEC’s increasingly aggressive position on many existing procedures are a few specific examples of rules affecting hedge funds.

The elimination of 4.13(a)(4) “takes away the ability of hedge-fund managers to engage in unlimited futures trading without registering as a commodity pool operator, even if the funds are only offered to qualified purchasers or super-wealthy investors,” Gordon told Markets Media. “Because managers were previously able to remain unregistered, this elimination seems to have the effect of deterring managers from pursuing certain investment strategies or launching their funds altogether.”

Registration requirements for Commodity Pool Operators and the resulting compliance obligations can be an added obligation, especially for new managers. The procedures are not insurmountable, but they do complicate the fund-launch process.

Uncertainty lingers,  but “we’re expecting more concrete answers this summer or in the early fall,” said Gordon. “Regulators, such as the SEC, have certainly been late on the implementation of many other provisions of the Dodd-Frank act, so I wouldn’t be surprised if this took a little more time.”

Earlier this week, CFTC Commissioner Bart Chilton told attendees at a hedge-fund conference that high-frequency trading was a focus for regulators, whose broad intent in setting down more rules is to safeguard market stability.