On October 27, the U.S. House of Representatives Committee on Financial Services approved the Private Fund Investment Advisers Registration Act of 2009 (to be reported as H.R. 3818) by a bipartisan vote of 67 to 1 (Rep. Ron Paul (R-TX) opposing). Although the passing of the bill brings the anticipated required registration for private fund advisers closer to reality, yesterday's amendments to the bill also bring the comfort of a one-year transition period before the bill becomes effective and certain limited exemptions. The material provisions of the bill are discussed below.
If enacted as proposed, the bill would require investment advisers of certain unregistered investment companies to register with and provide information to the SEC. Rep. Paul Kanjorski (D-Pa.), Chairman of the House Financial Services Committee's Capital Markets Subcommittee, introduced the bill on October 1, 2009. Similar to the Treasury bill introduced on July 15, 2009 (discussed in our July 16th Alert), Rep. Kanjorski's bill would eliminate the exemption currently in Section 203(b) of the Investment Advisers Act of 1940, as amended (Advisers Act), for investment advisers who during the course of the preceding 12 months have had fewer than 15 clients. In addition, the bill would impose additional ongoing requirements on registered private fund advisers, including:
Maintaining books and records and submitting reports regarding the private funds themselves; Making certain disclosures to investors, prospective investors, counterparties, and creditors; and Sharing information with the Board of Governors of the Federal Reserve System for the purpose of assessing the systemic risk of a private fund. Expanding on the Treasury bill, Rep. Kanjorski's bill would also:
Exempt from registration investment advisers to "venture capital funds," as such term is to be defined by the SEC, although investment advisers to such funds still would be required to maintain such records and provide to the SEC such annual or other reports as the SEC determines necessary or appropriate in the public interest or for the protection of investors. Authorize the SEC to require reporting of such additional information from private fund advisers as the SEC determines necessary—not just as necessary or appropriate in the public interest and for the protection of investors or for the assessment of systemic risk. Authorize information sharing with any entity identified by the SEC as having...