U.S. Senate Version Of Private Fund Investment Advisers Registration Act Of 2009 Contains Exemption For Advisers To 'Private Equity Funds'

Article by Paul J. Verbesey , Elizabeth Shea Fries , David W. Watson , Robert S. Fore and Jonathan Axelrad

Craig S. Blumsack and Lia Schmidt contributed to the preparation of this Alert

Last week, Sen. Christopher Dodd (D-CT), Chairman of the Banking, Housing, and Urban Affairs Committee, introduced a discussion draft of the Restoring American Financial Stability Act of 2009 (the "Dodd Bill") that comprehensively addresses financial regulatory reform. The Dodd Bill includes a modified version of the Private Fund Investment Advisers Registration Act of 2009 (the "Registration Act") that was initially introduced by the Obama Administration in July and was subsequently presented in the U.S. House of Representatives and approved by the House Financial Services Committee last month. In addition to the exemption for "venture capital fund" advisers first proposed in the House version of the Registration Act and included in the Dodd Bill, most notably, the Dodd Bill would also exempt any adviser to a "private equity fund" from the registration requirements of the bill.

The Obama Administration Version Of The Registration Act The Registration Act was first introduced by the Obama Administration in July 2009 (see Goodwin Procter's July 21, 2009 Financial Services Alert), and the Obama Administration's version would (i) effectively eliminate the "private adviser" exemption,1 (ii) require every adviser to "private funds" (including hedge funds, private equity funds and venture capital funds) with at least $30 million in assets under management to register with the Securities and Exchange Commission (the "SEC") under the Investment Advisers Act of 1940 (the "Advisers Act") and (iii) impose upon advisers enhanced recordkeeping and reporting obligations designed to help the SEC and other government agencies identify and monitor threats to the stability of the economy.

The House Version Of The Registration Act And The "Venture Capital Fund" Adviser Exemption On October 1, 2009, Rep. Paul Kanjorski (D-PA), Chairman of the U.S. House of Representatives Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, released a modified version of the Registration Act ("H.R. 3818") modeled on the version of the Registration Act released by the Obama Administration in July, which provided an exemption from the registration requirements for advisers to a "venture capital fund" (see Goodwin Procter's October 15, 2009 Client Alert for a more detailed description of the...