[House Report 111-686]
[From the U.S. Government Publishing Office]
111th Congress Rept. 111-686
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
PRIVATE FUND INVESTMENT ADVISERS REGISTRATION ACT OF 2009
_______
December 16, 2010.--Ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 3818]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3818) to amend the Investment Advisers Act of
1940 to require advisers of certain unregistered investment
companies to register with and provide information to the
Securities and Exchange Commission, and for other purposes,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 5
Background and Need for Legislation.............................. 6
Hearings......................................................... 7
Committee Consideration.......................................... 8
Committee Votes.................................................. 8
Committee Oversight Findings..................................... 10
Performance Goals and Objectives................................. 10
New Budget Authority, Entitlement Authority, and Tax Expenditures 10
Committee Cost Estimate.......................................... 11
Congressional Budget Office Estimate............................. 11
Federal Mandates Statement....................................... 13
Advisory Committee Statement..................................... 13
Constitutional Authority Statement............................... 13
Applicability to Legislative Branch.............................. 13
Earmark Identification........................................... 13
Section-by-Section Analysis of the Legislation................... 13
Changes in Existing Law Made by the Bill, as Reported............ 16
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Private Fund Investment Advisers
Registration Act of 2009''.
SEC. 2. DEFINITIONS.
Section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
2(a)) is amended by adding at the end the following new paragraphs:
``(29) Private fund.--The term `private fund' means an issuer
that would be an investment company under section 3(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a-3(a)) but for the
exception provided from that definition by either section
3(c)(1) or section 3(c)(7) of such Act
``(30) Foreign private fund adviser.--The term `foreign
private fund adviser' means an investment adviser who--
``(A) has no place of business in the United States;
``(B) during the preceding 12 months has had--
``(i) fewer than 15 clients in the United
States; and
``(ii) assets under management attributable
to clients in the United States of less than
$25,000,000, or such higher amount as the
Commission may, by rule, deem appropriate in
the public interest or for the protection of
investors; and
``(C) neither holds itself out generally to the
public in the United States as an investment adviser,
nor acts as an investment adviser to any investment
company registered under the Investment Company Act of
1940, or a company which has elected to be a business
development company pursuant to section 54 of the
Investment Company Act of 1940 (15 U.S.C. 80a-53) and
has not withdrawn such election.''.
SEC. 3. ELIMINATION OF PRIVATE ADVISER EXEMPTION; LIMITED EXEMPTION FOR
FOREIGN PRIVATE FUND ADVISERS; LIMITED INTRASTATE
EXEMPTION.
Section 203(b) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
3(b)) is amended--
(1) in paragraph (1), by inserting ``, except an investment
adviser who acts as an investment adviser to any private
fund,'' after ``any investment adviser'';
(2) by amending paragraph (3) to read as follows:
``(3) any investment adviser that is a foreign private fund
adviser;'';
(3) in paragraph (5), by striking ``or'' at the end;
(4) in paragraph (6)--
(A) in subparagraph (A), by striking ``or'';
(B) in subparagraph (B), by striking the period at
the end and adding ``; or''; and
(C) by adding at the end the following new
subparagraph:
``(C) a private fund; or''; and
(5) by adding at the end the following:
``(7) any investment adviser who solely advises--
``(A) small business investment companies licensed
under the Small Business Investment Act of 1958;
``(B) entities that have received from the Small
Business Administration notice to proceed to qualify
for a license, which notice or license has not been
revoked; or
``(C) applicants, related to one or more licensed
small business investment companies covered in
subparagraph (A), that have applied for another
license, which application remains pending.''.
SEC. 4. COLLECTION OF SYSTEMIC RISK DATA.
Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-4)
is amended--
(1) by redesignating subsections (b) and (c) as subsections
(c) and (d), respectively; and
(2) by inserting after subsection (a) the following new
subsection:
``(b) Records and Reports of Private Funds.--
``(1) In general.--The Commission is authorized to require
any investment adviser registered under this Act to maintain
such records of and file with the Commission such reports
regarding private funds advised by the investment adviser as
are necessary or appropriate in the public interest and for the
protection of investors or for the assessment of systemic risk
as the Commission determines in consultation with the Board of
Governors of the Federal Reserve System. The Commission is
authorized to provide or make available to the Board of
Governors of the Federal Reserve System, and to any other
entity that the Commission identifies as having systemic risk
responsibility, those reports or records or the information
contained therein. The records and reports of any private fund,
to which any such investment adviser provides investment
advice, maintained or filed by an investment adviser registered
under this Act, shall be deemed to be the records and reports
of the investment adviser.
``(2) Required information.--The records and reports required
to be maintained or filed with the Commission under this
subsection shall include, for each private fund advised by the
investment adviser--
``(A) the amount of assets under management;
``(B) the use of leverage (including off-balance
sheet leverage);
``(C) counterparty credit risk exposures;
``(D) trading and investment positions;
``(E) trading practices; and
``(F) such other information as the Commission, in
consultation with the Board of Governors of the Federal
Reserve System, determines necessary or appropriate in
the public interest and for the protection of investors
or for the assessment of systemic risk.
``(3) Optional information.--The Commission may require the
reporting of such additional information from private fund
advisers as the Commission determines necessary. In making such
determination, the Commission, taking into account the public
interest and potential to contribute to systemic risk, may set
different reporting requirements for different classes of
private fund advisers, based on the particular types or sizes
of private funds advised by such advisers.
``(4) Maintenance of records.--An investment adviser
registered under this Act is required to maintain and keep such
records of private funds advised by the investment adviser for
such period or periods as the Commission, by rule or
regulation, may prescribe as necessary or appropriate in the
public interest and for the protection of investors or for the
assessment of systemic risk.
``(5) Examination of records.--
``(A) Periodic and special examinations.--All records
of a private fund maintained by an investment adviser
registered under this Act shall be subject at any time
and from time to time to such periodic, special, and
other examinations by the Commission, or any member or
representative thereof, as the Commission may
prescribe.
``(B) Availability of records.--An investment adviser
registered under this Act shall make available to the
Commission or its representatives any copies or
extracts from such records as may be prepared without
undue effort, expense, or delay as the Commission or
its representatives may reasonably request.
``(6) Information sharing.--The Commission shall make
available to the Board of Governors of the Federal Reserve
System, and to any other entity that the Commission identifies
as having systemic risk responsibility, copies of all reports,
documents, records, and information filed with or provided to
the Commission by an investment adviser under this subsection
as the Board, or such other entity, may consider necessary for
the purpose of assessing the systemic risk of a private fund.
All such reports, documents, records, and information obtained
by the Board, or such other entity, from the Commission under
this subsection shall be kept confidential in a manner
consistent with confidentiality established by the Commission
pursuant to paragraph (8).
``(7) Disclosures of certain private fund information.--An
investment adviser registered under this Act shall provide such
reports, records, and other documents to investors, prospective
investors, counterparties, and creditors, of any private fund
advised by the investment adviser as the Commission, by rule or
regulation, may prescribe as necessary or appropriate in the
public interest and for the protection of investors or for the
assessment of systemic risk.
``(8) Confidentiality of reports.--Notwithstanding any other
provision of law, the Commission shall not be compelled to
disclose any report or information contained therein required
to be filed with the Commission under this subsection. Nothing
in this paragraph shall authorize the Commission to withhold
information from the Congress or prevent the Commission from
complying with a request for information from any other Federal
department or agency or any self-regulatory organization
requesting the report or information for purposes within the
scope of its jurisdiction, or complying with an order of a
court of the United States in an action brought by the United
States or the Commission. For purposes of section 552 of title
5, United States Code, this paragraph shall be considered a
statute described in subsection (b)(3)(B) of such section.''.
SEC. 5. ELIMINATION OF DISCLOSURE PROVISION.
Section 210 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-10)
is amended by striking subsection (c).
SEC. 6. EXEMPTION OF AND REPORTING BY VENTURE CAPITAL FUND ADVISERS.
Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3)
is amended by adding at the end the following new subsection:
``(l) Exemption of and Reporting by Venture Capital Fund Advisers.--
The Commission shall identify and define the term `venture capital
fund' and shall provide an adviser to such a fund an exemption from the
registration requirements under this section (excluding any such fund
whose adviser is exempt from registration pursuant to paragraph (7) of
subsection (b)). The Commission shall require such advisers to maintain
such records and provide to the Commission such annual or other reports
as the Commission determines necessary or appropriate in the public
interest or for the protection of investors.''.
SEC. 7. EXEMPTION OF AND REPORTING BY CERTAIN PRIVATE FUND ADVISERS.
Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3),
as amended by section 6, is further amended by adding at the end the
following new subsections:
``(m) Exemption of and Reporting by Certain Private Fund Advisers.--
``(1) In general.--The Commission shall provide an exemption
from the registration requirements under this section to any
investment adviser of private funds, if each of such private
funds has assets under management in the United States of less
than $150,000,000.
``(2) Reporting.--The Commission shall require investment
advisers exempted by reason of this subsection to maintain such
records and provide to the Commission such annual or other
reports as the Commission determines necessary or appropriate
in the public interest or for the protection of investors.
``(n) Registration and Examination of Mid-sized Private Fund
Advisers.--In prescribing regulations to carry out the requirements of
this section with respect to investment advisers acting as investment
advisers to mid-sized private funds, the Commission shall take into
account the size, governance, and investment strategy of such funds to
determine whether they pose systemic risk, and shall provide for
registration and examination procedures with respect to the investment
advisers of such funds which reflect the level of systemic risk posed
by such funds.''.
SEC. 8. CLARIFICATION OF RULEMAKING AUTHORITY.
Section 211 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-11)
is amended--
(1) by amending subsection (a) to read as follows:
``(a) The Commission shall have authority from time to time to make,
issue, amend, and rescind such rules and regulations and such orders as
are necessary or appropriate to the exercise of the functions and
powers conferred upon the Commission elsewhere in this title, including
rules and regulations defining technical, trade, and other terms used
in this title. For the purposes of its rules and regulations, the
Commission may--
``(1) classify persons and matters within its jurisdiction
based upon, but not limited to--
``(A) size;
``(B) scope;
``(C) business model;
``(D) compensation scheme; or
``(E) potential to create or increase systemic risk;
``(2) prescribe different requirements for different classes
of persons or matters; and
``(3) ascribe different meanings to terms (including the term
`client', except the Commission shall not ascribe a meaning to
the term `client' that would include an investor in a private
fund managed by an investment adviser, where such private fund
has entered into an advisory contract with such adviser) used
in different sections of this title as the Commission
determines necessary to effect the purposes of this title.'';
and
(2) by adding at the end the following new subsection:
``(e) The Commission and the Commodity Futures Trading Commission
shall, after consultation with the Board of Governors of the Federal
Reserve System, within 12 months after the date of enactment of the
Private Fund Investment Advisers Registration Act of 2009, jointly
promulgate rules to establish the form and content of the reports
required to be filed with the Commission under sections 203(l) and
204(b) and with the Commodity Futures Trading Commission by investment
advisers that are registered both under the Investment Advisers Act of
1940 (15 U.S.C. 80b-1 et seq.) and the Commodity Exchange Act (7 U.S.C.
1 et seq.).''.
SEC. 9. GAO STUDY.
(a) Study Required.--The Comptroller General of the United States
shall carry out a study to assess the annual costs on industry members
and their investors due to the registration requirements and ongoing
reporting requirements under this Act and the amendments made by this
Act.
(b) Report to the Congress.--Not later than the end of the 2-year
period beginning on the date of the enactment of this Act, the
Comptroller General of the United States shall submit a report to the
Congress containing the findings and determinations made by the
Comptroller General in carrying out the study required under subsection
(a).
SEC. 10. EFFECTIVE DATE; TRANSITION PERIOD.
(a) Effective Date.--This Act, and the amendments made by this Act,
shall take effect with respect to investment advisers after the end of
the 1-year period beginning on the date of the enactment of this Act.
(b) Transition Period.--The Securities and Exchange Commission shall
prescribe rules and regulations to permit an investment adviser who
will be required to register with the Securities and Exchange
Commission by reason of this Act with the option of registering with
the Securities and Exchange Commission before the date described under
subsection (a).
SEC. 11. QUALIFIED CLIENT STANDARD.
Section 205(e) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
5(e)) is amended by adding at the end the following: ``With respect to
any factor used by the Commission in making a determination under this
subsection, if the Commission uses a dollar amount test in connection
with such factor, such as a net asset threshold, the Commission shall,
not later than one year after the date of the enactment of the Private
Fund Investment Advisers Registration Act of 2009, and every 5 years
thereafter, adjust for the effects of inflation on such test. Any such
adjustment that is not a multiple of $1,000 shall be rounded to the
nearest multiple of $1,000.''.
Purpose and Summary
H.R. 3818, the Private Fund Investment Advisers
Registration Act of 2009, addresses the threat of systemic and
investor risks posed by private pools of capital. Specifically,
the bill eliminates the existing ``private adviser'' exemption
in the Investment Advisers Act of 1940 (IAA) commonly relied on
by the advisers of private funds to avoid registering with the
U.S. Securities and Exchange Commission (SEC). The legislation
also expands the reporting requirements of investment advisers
who advise private funds by authorizing the SEC to collect
information from private fund advisers under two circumstances:
first, as the SEC determines to be necessary or appropriate in
the public interest and for the protection of investors; and
second, as the SEC determines, in consultation with the Board
of Governors of the Federal Reserve System, to be necessary for
the assessment of systemic risk. The legislation further
authorizes the SEC to share the reports of private fund
advisers with the Federal Reserve Board and any other entity
the SEC identifies as having systemic risk responsibility.
Additionally, H.R. 3818 amends the IAA to remove
impediments to the SEC's obtaining information concerning the
identity, investments, or affairs of the investment adviser's
clients. The bill further contains a limited exemption from
registration for advisers of ``venture capital funds''--a term
the SEC will define but subjects such advisers to information
collection rules. H.R. 3818 also generally exempts from
registration requirements the advisers of private funds, if
each of such private funds has assets under management in the
United States of less than $150 million, while maintaining
reporting requirements as directed by the SEC.
Finally, H.R. 3818 clarifies the SEC's authority to make
rules necessary for the exercise of the powers conferred upon
the SEC by the IAA. This includes the authority to define terms
such as ``client'' used in different sections of the bill.
Advisers must comply with the bill within one year of its
enactment, although the bill allows advisers to register
earlier with the SEC.
Background and Need for Legislation
The financial crisis that erupted in the fall of 2008
exposed numerous vulnerabilities in our present regulatory
system for the financial services industry, including a lack of
oversight of, and transparency with respect to, private pools
of capital. These pools take many forms, including hedge funds,
private equity funds, venture capital funds, and family
offices, among others. While they offer the promise of
increased market efficiency and job creation, these pools also
pose potential dangers for systemic risk and investor abuse.
In 2004, the SEC noted three emerging changes in the hedge
fund industry that justified greater regulation, and since
then, each trend has only intensified. First, the industry has
experienced rapid growth. Although asset levels are down from a
mid-2008 peak of $1.9 trillion, hedge funds alone, as of June
30, 2009, manage an estimated $1.43 trillion in assets. Second,
because of the ``retailization'' of hedge funds, ordinary
investors have become exposed to the industry. Third, fraud
actions brought against hedge funds have increased in recent
years.
Hedge funds and other private funds currently remain
subject to no continuous regulatory monitoring. Because of
minimal transparency in this sector of the financial markets,
government authorities have limited ability to monitor and
constrain systemic risks. The fact that private funds are
currently subject to federal fraud laws does not address this
regulatory gap.
The IAA generally requires investment advisers to register
with the SEC. Registered advisers must comply with rules
designed to protect investors and provide transparency. These
requirements govern areas including disclosure, conflicts of
interest, duties to customers, marketing, and recordkeeping.
Currently, section 203(b)(3) of the IAA offers a ``private
adviser'' exemption to investment advisers who: (1) have had
fewer than 15 clients during the preceding 12 months; (2) do
not hold themselves out generally to the public as investment
advisers; and (3) do not advise registered investment companies
or business development companies. This exemption has become an
escape hatch for many private advisers to avoid government
supervision. Although many of the largest hedge fund advisers
have voluntarily registered with the SEC, others have relied on
this exemption to avoid ongoing and direct regulatory
oversight.
In an attempt to fill this gap, in 2004 the SEC promulgated
a rule under the IAA that would have required certain fund
managers to register. In 2006, however, a federal appellate
court found that the SEC had exceeded its statutory authority
and vacated the rule.
On June 17, 2009, the Obama Administration released a white
paper entitled Financial Regulatory Reform: A New Foundation,
which proposes comprehensive regulatory reform for the
financial services industry. Among other things, the white
paper specifically calls for amending the IAA to require the
registration with the SEC of all advisers to hedge funds and
other private pools of capital whose assets under management
exceed some modest threshold. In making its case for the
registration of private fund advisers, the Administration's
white paper notes:
At various points in the financial crisis, de-
leveraging by hedge funds contributed to the strain on
financial markets. Since these funds were not required
to register with regulators, however, the government
lacked reliable, comprehensive data with which to
assess this sort of market activity. In addition to the
need to gather information in order to assess potential
systemic implications of the activity of hedge funds
and other private pools of capital, it has also become
clear that there is a compelling investor protection
rationale to fill the gaps in the regulation of
investment advisors and the funds that they manage.\1\
---------------------------------------------------------------------------
\1\See Financial Regulatory Reform: A New Foundation, p. 37,
available at http://www.financialstability.gov/docs/regs/FinalReport--
web.pdf.
The white paper also calls for private fund advisers to
report information that is sufficient to assess whether the
funds they advise pose a threat to financial stability. After
releasing the white paper, the Administration proposed
legislative text designed to implement its proposal for the
registration of private fund advisers.
On October 1, Capital Markets Subcommittee Chairman Paul E.
Kanjorski released a discussion draft of the Private Fund
Investment Advisers Registration Act of 2009, which he
subsequently introduced on October 15 as H.R. 3818. Consistent
with the Administration's request, this legislation seeks to
close the current regulatory gap affecting the registration and
oversight of private fund advisers while also addressing both
investor protection and systemic risk as it relates to private
pools of capital.
Hearings
The Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises held an oversight hearing
entitled Perspectives on Hedge Fund Registration on May 7,
2009. At the hearing, the following individuals testified:
Mr. W. Todd Groome, Chairman, Alternative Investment
Management Association;
The Honorable Richard H. Baker, President, Managed
Funds Association;
Mr. James S. Chanos, Chairman, Coalition of Private
Investment Companies;
Ms. Orice Williams, Director, Financial Markets and
Community Investment Team, Government Accountability
Office; and
Mr. Britt Harris, Chief Investment Officer, Teacher
Retirement System of Texas.
The Financial Services Committee subsequently held a
legislative hearing entitled Capital Markets Regulatory Reform:
Strengthening Investor Protection, Enhancing Oversight of
Private Pools of Capital, and Creating a National Insurance
Office on October 6, 2009. The second panel at this hearing
testified about the Private Fund Investment Advisers
Registration Act. The following witnesses participated on the
second panel:
Mr. Stuart J. Kaswell, Executive Vice President,
Managing Director, and General Counsel, Managed Funds
Association;
Mr. Douglas Lowenstein, President, Private Equity
Council;
Mr. James S. Chanos, Chairman, Coalition of Private
Investment Companies; and
Mr. Terry McGuire, Co-Founder and General Partner,
Polaris Venture Partners, and Chairman, National
Venture Capital Association.
Committee Consideration
The Committee on Financial Services met in open session on
October 27, 2009, and ordered H.R. 3818, Private Fund
Investment Advisers Registration Act of 2009, as amended,
favorably reported to the House by a record vote of 67 yeas and
1 nay.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Frank to report the bill, as amended, to the
House with a favorable recommendation was agreed to by a record
vote of 67 yeas and 1 nay (Record vote no. FC-78). The names of
Members voting for and against follow:
RECORD VOTE NO. FC-78
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... X ........ .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. X ........ ......... Mr. Paul......... ........ X .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... X ........ ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... X ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... ........ ........ .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... X ........ ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... X ........ .........
Mr. Green...................... X ........ ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... X ........ ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. X ........ ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... X ........ ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ X ........ .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... X ........ ......... Mr. Lance........ X ........ .........
Mr. Foster..................... X ........ ......... ................. ........ ........ .........
Mr. Carson..................... X ........ ......... ................. ........ ........ .........
Ms. Speier..................... X ........ ......... ................. ........ ........ .........
Mr. Childers................... X ........ ......... ................. ........ ........ .........
Mr. Minnick.................... X ........ ......... ................. ........ ........ .........
Mr. Adler...................... X ........ ......... ................. ........ ........ .........
Ms. Kilroy..................... X ........ ......... ................. ........ ........ .........
Mr. Driehaus................... X ........ ......... ................. ........ ........ .........
Ms. Kosmas..................... X ........ ......... ................. ........ ........ .........
Mr. Grayson.................... X ........ ......... ................. ........ ........ .........
Mr. Himes...................... X ........ ......... ................. ........ ........ .........
Mr. Peters..................... X ........ ......... ................. ........ ........ .........
Mr. Maffei..................... X ........ ......... ................. ........ ........ .........
----------------------------------------------------------------------------------------------------------------
During the consideration of the bill, the following
amendment was disposed of by a record vote. The names of
Members voting for and against follow:
An amendment by Mr. Hensarling, no. 9, striking ``systemic
risk,'' was not agreed to by a record vote of 24 yeas and 43
nays (Record vote no. FC-77):
RECORD VOTE NO. FC-77
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... X ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ X ......... Mr. Paul......... X ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. X ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... ........ ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... ........ ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... ........ X .........
Mr. Green...................... ........ X ......... Mr. Putnam....... X ........ .........
Mr. Cleaver.................... ........ X ......... Mrs. Bachmann.... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X ......... ................. ........ ........ .........
Mr. Carson..................... ........ X ......... ................. ........ ........ .........
Ms. Speier..................... ........ X ......... ................. ........ ........ .........
Mr. Childers................... ........ X ......... ................. ........ ........ .........
Mr. Minnick.................... ........ X ......... ................. ........ ........ .........
Mr. Adler...................... ........ X ......... ................. ........ ........ .........
Ms. Kilroy..................... ........ X ......... ................. ........ ........ .........
Mr. Driehaus................... ........ X ......... ................. ........ ........ .........
Ms. Kosmas..................... ........ X ......... ................. ........ ........ .........
Mr. Grayson.................... ........ X ......... ................. ........ ........ .........
Mr. Himes...................... ........ X ......... ................. ........ ........ .........
Mr. Peters..................... ........ X ......... ................. ........ ........ .........
Mr. Maffei..................... ........ X ......... ................. ........ ........ .........
----------------------------------------------------------------------------------------------------------------
The following other amendments were also considered by the
Committee:
An amendment by Mr. Kanjorski (and Mr. Frank), no. 1,
manager's amendment, was agreed to by voice vote.
An amendment by Mr. Bachus, no. 2, regarding the definition
of ``client'', was agreed to by voice vote.
An amendment by Mr. Peters, no. 3, regarding exemption of
and reporting by certain private fund advisers, was offered and
withdrawn.
An amendment by Mr. Garrett, no. 4, regarding a GAO study,
was agreed to by voice vote.
An amendment by Ms. Kosmas, no. 5, regarding transition
period and effective date, was agreed to by voice vote.
An amendment by Mrs. Capito (and Mr. Paulsen), no. 6,
regarding small business advisory exemption, was agreed to by
voice vote.
An amendment by Mr. Lucas, no. 7, regarding commodity
trading advisers exemption, was offered and withdrawn.
An amendment by Mr. Hensarling, no. 8, regarding exemption
of hedge fund advisers, was not agreed to by voice vote.
An amendment by Mrs. Bachmann, no. 10, regarding transition
rule, was agreed to by voice vote.
An amendment by Mr. McCarthy (CA), no. 11, striking
consultation with the Federal Reserve, was not agreed to by
voice vote.
An amendment by Mr. Himes, no. 12, regarding qualified
client standard, was agreed to by voice vote.
An amendment by Mr. Peters (and Mr. Meeks and Mr. Garrett),
no. 13, regarding exemption and reporting by certain private
fund advisers, was agreed to by voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 3818 aims to increase the number of advisers in the
securities industry who must register with the SEC under the
Investment Advisers Act of 1940 in order to improve regulatory
access to information about the participants in and performance
of the capital markets, decrease the likelihood of systemic
risk, and enhance investor protection.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, November 13, 2009.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3818, the Private
Fund Investment Advisers Registration Act of 2009.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 3818--Private Fund Investment Advisers Registration Act of 2009
Summary: H.R. 3818 would require individuals and
organizations that provide investment advice to private
investment funds to register with the Securities and Exchange
Commission (SEC). The bill would authorize the SEC to exempt
advisers that provide services to venture capital funds from
registration requirements. H.R. 3818 also would require the
Government Accountability Office (GAO) to prepare a report to
the Congress on the annual costs of the new registration and
reporting requirements to investment advisers and their
clients.
Based on information from the SEC, CBO estimates that
implementing the provisions of H.R. 3818 would cost $140
million over the 2010-2014 period, assuming appropriation of
the necessary amounts. CBO estimates that enacting H.R. 3818
would not affect revenues or direct spending.
H.R. 3818 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
By placing new requirements on investment advisers of
private investment firms, H.R. 3818 would impose private-sector
mandates, as defined in UMRA. Based on information from the SEC
and industry sources, CBO estimates that the aggregate cost of
complying with the mandates would not exceed the annual
threshold established in UMRA for private-sector mandates ($139
million in 2009, adjusted annually for inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 3818 is shown in the following table.
The costs of this legislation fall within budget function 370
(commerce and housing credit).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------
2010 2011 2012 2013 2014 2010-2014
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level................................ 9 29 36 36 37 147
Estimated Outlays............................................ 7 26 35 36 36 140
----------------------------------------------------------------------------------------------------------------
Basis of estimate: Based on information from the SEC, CBO
estimates that the SEC would add 150 employees by fiscal year
2011 to write regulations and undertake the additional
examination and enforcement activities required by the bill
(about a 4 percent increase over its 2009 staffing levels).
Assuming appropriation of the necessary amounts, CBO estimates
that implementing H.R. 3818 would cost $140 million over the
2010-2014 period. That amount would cover the cost of salaries
and benefits, overhead, preparation of reports, and upgrades to
information technology systems. CBO estimates that enacting
H.R. 3818 would not affect revenues or direct spending.
Estimated impact on State, local, and tribal governments:
H.R. 3818 contains no intergovernmental mandates as defined in
UMRA and would not affect the budgets of state, local, or
tribal governments.
Estimated impact on the private sector: H.R. 3818 would
impose private-sector mandates, as defined in UMRA, on
individuals and firms that provide investment advice to private
investment funds. Based on information from the SEC and
industry sources, CBO estimates that the aggregate cost of
complying with the mandates would not exceed the annual
threshold established in UMRA for private-sector mandates ($139
million in 2009, adjusted annually for inflation).
The bill would require investment advisers of hedge funds
and private equity firms to register with the SEC. The advisers
would be subject to existing SEC requirements for registered
funds. Approximately 1,300 investment advisers would be
affected by the new registration requirements. According to
industry experts, the expenses for those advisers to prepare
for the registration process would average less than $30,000
per firm. Advisers also would incur ongoing costs to comply
with SEC requirements. Based upon information from industry
sources and the SEC, CBO estimates that the cost of the mandate
would be small relative to the annual threshold.
Additionally, the bill would require all investment
advisers for private funds to maintain records and provide to
the SEC, if requested, certain financial information related to
the assets held by the firm. Industry sources and the SEC
indicate that the information required under the bill is
readily available to most firms. Therefore, CBO estimates this
mandate would not require firms to incur significant costs.
Estimate approved by: Federal Costs: Susan Willie; Impact
on State, Local, and Tribal Governments: Elizabeth Cove
Delisle; Impact on the Private Sector: Samuel Wice and Paige
Piper/Bach.
Estimate approved by: Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 3818 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
Section 1. Short title
The section designates the title of the bill as the
``Private Fund Investment Advisers Registration Act of 2009''.
Section 2. Definitions
This section amends the Investment Advisers Act of 1940
(IAA) by adding definitions for ``private fund'' and ``foreign
private fund adviser''.
Section 3. Elimination of private adviser exemption; limited exemption
for foreign private fund advisers; limited intrastate exemption
This section eliminates the IAA's existing private adviser
exemption, which exempts from registration investment advisers
that have fewer than 15 clients, do not hold themselves out to
the public as investment advisers, and do not act as investment
advisers to registered investment companies or business
development companies. This section additionally creates a
limited exemption for foreign private fund advisers. Finally,
the section exempts any investment adviser who only advises
either licensed small business investment companies, related
applicants for other licenses, or funds that have received
Small Business Administration notice to proceed to qualify for
a license.
As a consequence of repealing Section 203(b)(3) of the
Investment Advisers Act, the bill may require a number of
professionals that provide advice to members of a single family
(i.e., ``family offices'') to register as investment advisers.
The SEC, however, has previously issued a number of orders
deeming family offices not to be investment advisers and thus
not subject to the Investment Advisers Act, including its
registration provisions. The SEC may continue to issue such
orders for advisers of family offices that apply for
consideration if the SEC determines that the exemption is
permissible under the statute.
Although the amendments to Section 203(b)(3) are intended
to expand registration requirements to a broader range of
companies, the amendments are not intended to affect investment
advisers that are exempt from registration under Section
203(b)(2). Thus, registration would not be required for a
wholly owned subsidiary within an affiliated group of insurance
companies that is established and operated for the sole purpose
of providing investment advisory services to the members of the
affiliated group of insurance companies, and does not hold
itself out to the public as an investment adviser.
Section 4. Collection of systemic risk data
This section amends the IAA by authorizing the SEC to
require registered investment advisers to maintain records of,
and file reports about, the private funds they advise in two
instances: first, as the SEC determines is necessary or
appropriate in the public interest and for the protection of
investors; and second, as the SEC determines, in consultation
with the Federal Reserve Board and any other entity that the
SEC identifies as having systemic risk responsibility, to be
necessary for the assessment of systemic risk. The records and
reports of any private fund are further deemed to be the
records and reports of the registered investment adviser.
The section enumerates certain types of required
information for the reports--for example, the amount of assets
under management, the use of leverage, and counterparty credit
risk exposures, among others--and authorizes the SEC to require
such other information as the SEC, in consultation with the
Federal Reserve Board, determines to be necessary or
appropriate in the public interest and for the protection of
investors or for the assessment of systemic risk. The section
further permits the SEC to require the reporting of different
information from different classes of private advisers, based
on the particular types or sizes of private funds advised by
such advisers. The SEC may also require the reporting of such
additional information from private fund advisers as the agency
determines necessary. It is intended that the SEC, when making
rules, will take into consideration the risk associated with
various types of funds and scale their requirements to that
risk.
The section further sets forth requirements related to the
maintenance of records and the periodic and special examination
by the SEC of such records. Investment advisers shall also make
available to the SEC or its representatives any copies or
extracts from such records as may be prepared without undue
effort, expense, or delay as the SEC or its representatives may
reasonably request.
The section additionally requires the SEC to share these
records and reports with the Federal Reserve Board and any
other entity that the SEC identifies as having a systemic risk
responsibility. The confidentiality of these shared records is
protected.
This section also gives the SEC the authority to prescribe,
by rule or regulation, that investment advisers shall provide
reports, records and other documents to the investors,
prospective investors, creditors, and counterparties of the
private funds they advise. Finally, the section provides that
the SEC shall not be compelled to disclose any report that
advisers provide to the SEC under this section, or any
information contained within such report; but the SEC may
neither withhold such information from Congress nor decline
requests for information from any Federal department or agency
or any self-regulatory organization when acting in its
jurisdiction.
Section 5. Elimination of disclosure provision
This section amends the IAA to remove a provision that
generally bars the SEC from requiring investment advisers to
disclose the identity, investments, or affairs of their
clients.
Section 6. Exemption of and reporting by venture capital fund advisers
This section amends the IAA by authorizing the SEC to
define ``venture capital fund'' and provides a new exemption
for the advisers of venture capital funds. The section also
authorizes the SEC to require the advisers to venture capital
funds to maintain records and provide reports as the SEC deems
appropriate to protect investors or in the public interest.
Section 7. Exemption of and reporting by certain private fund advisers
This section requires the SEC to exempt from registration
an investment adviser of private funds, if each of such funds
has assets under management in the United States of less than
$150 million. Nevertheless, these investment advisers must
maintain records and provide to the SEC such annual or other
reports as the SEC deems necessary or appropriate in the public
interest or for investor protection. The SEC is also authorized
to take into account the size, governance, and investment
strategy of a fund to determine if the fund poses a systemic
risk. The SEC can provide registration and examination
procedures based on this finding.
Section 8. Clarification of rulemaking authority
This section addresses the authority to make rules
necessary for the exercise of the SEC's powers under the IAA.
This rulemaking power includes the ability to give different
meanings to terms, including ``client'', used in different
sections of the IAA. The definition of ``client'' will not
include the investor in a private fund managed by an investment
adviser, where the private fund has entered into an advisory
contract with such adviser. Additionally, the section directs
the SEC and the Commodity Futures Trading Commission to jointly
issue rules to establish the form and content of required
reports for investment advisers dually registered under the IAA
and the Commodity Exchange Act.
Section 9. GAO study
This section authorizes a study by the Comptroller General
of the United States to assess the annual cost of registration
requirements and ongoing reporting requirements under the
legislation. Study findings must be reported to Congress no
later than 2 years from the enactment of the bill.
Section 10. Effective date; transition period
This section outlines the timeline for compliance with this
bill. Covered investment advisers must register with the SEC
within one year of the bill's enactment, but the SEC through
rulemaking can give investment advisers the option to register
earlier.
Section 11. Qualified client standard
This section states that the SEC must adjust for the
effects of inflation on any dollar amount used in making
determinations (for example, net asset threshold) under
subsection 205(e) of the Investment Advisers Act. This
adjustment must be made no later than one year after enactment
and every five years thereafter.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
INVESTMENT ADVISERS ACT OF 1940
TITLE II--INVESTMENT ADVISERS
* * * * * * *
DEFINITIONS
Sec. 202. (a) When used in this title, unless the context
otherwise requires, the following definitions shall apply:
(1) * * *
* * * * * * *
(29) Private fund.--The term ``private fund'' means
an issuer that would be an investment company under
section 3(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-3(a)) but for the exception provided from
that definition by either section 3(c)(1) or section
3(c)(7) of such Act.
(30) Foreign private fund adviser.--The term
``foreign private fund adviser'' means an investment
adviser who--
(A) has no place of business in the United
States;
(B) during the preceding 12 months has had--
(i) fewer than 15 clients in the
United States; and
(ii) assets under management
attributable to clients in the United
States of less than $25,000,000, or
such higher amount as the Commission
may, by rule, deem appropriate in the
public interest or for the protection
of investors; and
(C) neither holds itself out generally to the
public in the United States as an investment
adviser, nor acts as an investment adviser to
any investment company registered under the
Investment Company Act of 1940, or a company
which has elected to be a business development
company pursuant to section 54 of the
Investment Company Act of 1940 (15 U.S.C. 80a-
53) and has not withdrawn such election.
* * * * * * *
REGISTRATION OF INVESTMENT ADVISERS
Sec. 203. (a) * * *
(b) The provisions of subsection (a) shall not apply to--
(1) any investment adviser, except an investment
adviser who acts as an investment adviser to any
private fund, all of whose clients are residents of the
State within which such investment adviser maintains
his or its principal office and place of business, and
who does not furnish advice or issue analyses or
reports with respect to securities listed or admitted
to unlisted trading privileges on any national
securities exchange;
* * * * * * *
[(3) any investment adviser who during the course of
the preceding twelve months has had fewer than fifteen
clients and who neither holds himself out generally to
the public as an investment adviser nor acts as an
investment adviser to any investment company registered
under title I of this Act, or a company which has
elected to be a business development company pursuant
to section 54 of title I of this Act and has not
withdrawn its election. For purposes of determining the
number of clients of an investment adviser under this
paragraph, no shareholder, partner, or beneficial owner
of a business development company, as defined in this
title, shall be deemed to be a client of such
investment adviser unless such person is a client of
such investment adviser separate and apart from his
status as a shareholder, partner, or beneficial owner;]
(3) any investment adviser that is a foreign private
fund adviser;
* * * * * * *
(5) any plan described in section 414(e) of the
Internal Revenue Code of 1986, any person or entity
eligible to establish and maintain such a plan under
the Internal Revenue Code of 1986, or any trustee,
director, officer, or employee of or volunteer for any
such plan or person, if such person or entity, acting
in such capacity, provides investment advice
exclusively to, or with respect to, any plan, person,
or entity or any company, account, or fund that is
excluded from the definition of an investment company
under section 3(c)(14) of the Investment Company Act of
1940; [or]
(6) any investment adviser that is registered with
the Commodity Futures Trading Commission as a commodity
trading advisor whose business does not consist
primarily of acting as an investment adviser, as
defined in section 202(a)(11) of this title, and that
does not act as an investment adviser to--
(A) an investment company registered under
title I of this Act; [or]
(B) a company which has elected to be a
business development company pursuant to
section 54 of title I of this Act and has not
withdrawn its election[.]; or
(C) a private fund; or
(7) any investment adviser who solely advises--
(A) small business investment companies
licensed under the Small Business Investment
Act of 1958;
(B) entities that have received from the
Small Business Administration notice to proceed
to qualify for a license, which notice or
license has not been revoked; or
(C) applicants, related to one or more
licensed small business investment companies
covered in subparagraph (A), that have applied
for another license, which application remains
pending.
* * * * * * *
(l) Exemption of and Reporting by Venture Capital Fund
Advisers.--The Commission shall identify and define the term
``venture capital fund'' and shall provide an adviser to such a
fund an exemption from the registration requirements under this
section (excluding any such fund whose adviser is exempt from
registration pursuant to paragraph (7) of subsection (b)). The
Commission shall require such advisers to maintain such records
and provide to the Commission such annual or other reports as
the Commission determines necessary or appropriate in the
public interest or for the protection of investors.
(m) Exemption of and Reporting by Certain Private Fund
Advisers.--
(1) In general.--The Commission shall provide an
exemption from the registration requirements under this
section to any investment adviser of private funds, if
each of such private funds has assets under management
in the United States of less than $150,000,000.
(2) Reporting.--The Commission shall require
investment advisers exempted by reason of this
subsection to maintain such records and provide to the
Commission such annual or other reports as the
Commission determines necessary or appropriate in the
public interest or for the protection of investors.
(n) Registration and Examination of Mid-Sized Private Fund
Advisers.--In prescribing regulations to carry out the
requirements of this section with respect to investment
advisers acting as investment advisers to mid-sized private
funds, the Commission shall take into account the size,
governance, and investment strategy of such funds to determine
whether they pose systemic risk, and shall provide for
registration and examination procedures with respect to the
investment advisers of such funds which reflect the level of
systemic risk posed by such funds.
* * * * * * *
ANNUAL AND OTHER REPORTS
Sec. 204. (a) * * *
(b) Records and Reports of Private Funds.--
(1) In general.--The Commission is authorized to
require any investment adviser registered under this
Act to maintain such records of and file with the
Commission such reports regarding private funds advised
by the investment adviser as are necessary or
appropriate in the public interest and for the
protection of investors or for the assessment of
systemic risk as the Commission determines in
consultation with the Board of Governors of the Federal
Reserve System. The Commission is authorized to provide
or make available to the Board of Governors of the
Federal Reserve System, and to any other entity that
the Commission identifies as having systemic risk
responsibility, those reports or records or the
information contained therein. The records and reports
of any private fund, to which any such investment
adviser provides investment advice, maintained or filed
by an investment adviser registered under this Act,
shall be deemed to be the records and reports of the
investment adviser.
(2) Required information.--The records and reports
required to be maintained or filed with the Commission
under this subsection shall include, for each private
fund advised by the investment adviser--
(A) the amount of assets under management;
(B) the use of leverage (including off-
balance sheet leverage);
(C) counterparty credit risk exposures;
(D) trading and investment positions;
(E) trading practices; and
(F) such other information as the Commission,
in consultation with the Board of Governors of
the Federal Reserve System, determines
necessary or appropriate in the public interest
and for the protection of investors or for the
assessment of systemic risk.
(3) Optional information.--The Commission may require
the reporting of such additional information from
private fund advisers as the Commission determines
necessary. In making such determination, the
Commission, taking into account the public interest and
potential to contribute to systemic risk, may set
different reporting requirements for different classes
of private fund advisers, based on the particular types
or sizes of private funds advised by such advisers.
(4) Maintenance of records.--An investment adviser
registered under this Act is required to maintain and
keep such records of private funds advised by the
investment adviser for such period or periods as the
Commission, by rule or regulation, may prescribe as
necessary or appropriate in the public interest and for
the protection of investors or for the assessment of
systemic risk.
(5) Examination of records.--
(A) Periodic and special examinations.--All
records of a private fund maintained by an
investment adviser registered under this Act
shall be subject at any time and from time to
time to such periodic, special, and other
examinations by the Commission, or any member
or representative thereof, as the Commission
may prescribe.
(B) Availability of records.--An investment
adviser registered under this Act shall make
available to the Commission or its
representatives any copies or extracts from
such records as may be prepared without undue
effort, expense, or delay as the Commission or
its representatives may reasonably request.
(6) Information sharing.--The Commission shall make
available to the Board of Governors of the Federal
Reserve System, and to any other entity that the
Commission identifies as having systemic risk
responsibility, copies of all reports, documents,
records, and information filed with or provided to the
Commission by an investment adviser under this
subsection as the Board, or such other entity, may
consider necessary for the purpose of assessing the
systemic risk of a private fund. All such reports,
documents, records, and information obtained by the
Board, or such other entity, from the Commission under
this subsection shall be kept confidential in a manner
consistent with confidentiality established by the
Commission pursuant to paragraph (8).
(7) Disclosures of certain private fund
information.--An investment adviser registered under
this Act shall provide such reports, records, and other
documents to investors, prospective investors,
counterparties, and creditors, of any private fund
advised by the investment adviser as the Commission, by
rule or regulation, may prescribe as necessary or
appropriate in the public interest and for the
protection of investors or for the assessment of
systemic risk.
(8) Confidentiality of reports.--Notwithstanding any
other provision of law, the Commission shall not be
compelled to disclose any report or information
contained therein required to be filed with the
Commission under this subsection. Nothing in this
paragraph shall authorize the Commission to withhold
information from the Congress or prevent the Commission
from complying with a request for information from any
other Federal department or agency or any self-
regulatory organization requesting the report or
information for purposes within the scope of its
jurisdiction, or complying with an order of a court of
the United States in an action brought by the United
States or the Commission. For purposes of section 552
of title 5, United States Code, this paragraph shall be
considered a statute described in subsection (b)(3)(B)
of such section.
[(b)] (c) Filing Depositories.--The Commission may, by rule,
require an investment adviser--
(1) * * *
* * * * * * *
[(c)] (d) Access to Disciplinary and Other Information.--
(1) * * *
* * * * * * *
INVESTMENT ADVISORY CONTRACTS
Sec. 205. (a) * * *
* * * * * * *
(e) The Commission, by rule or regulation, upon its own
motion, or by order upon application, may conditionally or
unconditionally exempt any person or transaction, or any class
or classes of persons or transactions, from subsection (a)(1),
if and to the extent that the exemption relates to an
investment advisory contract with any person that the
Commission determines does not need the protections of
subsection (a)(1), on the basis of such factors as financial
sophistication, net worth, knowledge of and experience in
financial matters, amount of assets under management,
relationship with a registered investment adviser, and such
other factors as the Commission determines are consistent with
this section. With respect to any factor used by the Commission
in making a determination under this subsection, if the
Commission uses a dollar amount test in connection with such
factor, such as a net asset threshold, the Commission shall,
not later than one year after the date of the enactment of the
Private Fund Investment Advisers Registration Act of 2009, and
every 5 years thereafter, adjust for the effects of inflation
on such test. Any such adjustment that is not a multiple of
$1,000 shall be rounded to the nearest multiple of $1,000.
* * * * * * *
PUBLICITY
Sec. 210. (a) * * *
* * * * * * *
[(c) No provision of this title shall be construed to
require, or to authorize the Commission to require any
investment adviser engaged in rendering investment supervisory
services to disclose the identity, investments, or affairs of
any client of such investment adviser, except insofar as such
disclosure may be necessary or appropriate in a particular
proceeding or investigation having as its object the
enforcement of a provision or provisions of this title.]
* * * * * * *
RULES, REGULATIONS, AND ORDERS
Sec. 211. [(a) The Commission shall have authority from time
to time to make, issue, amend, and rescind such rules and
regulations and such orders as are necessary or appropriate to
the exercise of the functions and powers conferred upon the
Commission elsewhere in this title. For the purposes of its
rules or regulations the Commission may classify persons and
matters within its jurisdiction and prescribe different
requirements for different classes of persons or matters.] (a)
The Commission shall have authority from time to time to make,
issue, amend, and rescind such rules and regulations and such
orders as are necessary or appropriate to the exercise of the
functions and powers conferred upon the Commission elsewhere in
this title, including rules and regulations defining technical,
trade, and other terms used in this title. For the purposes of
its rules and regulations, the Commission may--
(1) classify persons and matters within its
jurisdiction based upon, but not limited to--
(A) size;
(B) scope;
(C) business model;
(D) compensation scheme; or
(E) potential to create or increase systemic
risk;
(2) prescribe different requirements for different
classes of persons or matters; and
(3) ascribe different meanings to terms (including
the term ``client'', except the Commission shall not
ascribe a meaning to the term ``client'' that would
include an investor in a private fund managed by an
investment adviser, where such private fund has entered
into an advisory contract with such adviser) used in
different sections of this title as the Commission
determines necessary to effect the purposes of this
title.
* * * * * * *
(e) The Commission and the Commodity Futures Trading
Commission shall, after consultation with the Board of
Governors of the Federal Reserve System, within 12 months after
the date of enactment of the Private Fund Investment Advisers
Registration Act of 2009, jointly promulgate rules to establish
the form and content of the reports required to be filed with
the Commission under sections 203(l) and 204(b) and with the
Commodity Futures Trading Commission by investment advisers
that are registered both under the Investment Advisers Act of
1940 (15 U.S.C. 80b-1 et seq.) and the Commodity Exchange Act
(7 U.S.C. 1 et seq.).
* * * * * * *