The Obama Administration has announced proposed legislation that would require all advisers to hedge funds and other private pools of capital, including private equity and venture capit
The Obama Administration has announced proposed legislation that would require all advisers to hedge funds and other private pools of capital, including private equity and venture capital funds, to register with the Securities and Exchange Commission.
The proposed legislation is designed to protect investors from fraud and abuse, provide increased transparency, and provide the information necessary to assess whether risks in the aggregate or risks in any particular fund pose a threat to our overall financial stability.
The Administration’s proposed legislation would eliminate the private adviser exception in the Investment Advisers Act and require hedge fund managers and other investment advisers to private investment pools with at least USD30m in assets under management to register with the SEC.
It would eliminate the exemption from registration in the Advisers Act for certain commodity trading advisers registered with the CFTC if the commodity trading adviser acts as an investment adviser to a private fund.
The legislation would also give the SEC authority to require investment advisers to maintain records and submit reports of information relating to both the adviser and funds it manages, in order to allow for the supervision of systemic risk by the Board of Governors of the Federal Reserve and the Financial Services Oversight Council, and to provide such information to the Board and Council. The reported information must include at least, for each private fund, the amount of assets under management, use of leverage (including off-balance sheet leverage), counterparty credit risk exposures, trading and investment positions, and trading practices. Each adviser must maintain records of such information and make them available to the SEC upon request, and would be subject at any time to periodic, special, or other examinations by the SEC. Information provided by the SEC to the board or council would be kept confidential.
The SEC would have authority to require investment advisers to provide reports, records and other documents of private funds to investors, prospective investors, counterparties, and creditors, for the protection of investors or the assessment of systemic risk.
It would be permitted to keep confidential any information in reports required to be filed with the SEC, except pursuant to requests from Congress or other federal agencies; and have authority to define the term client differently for different purposes of the Advisers Act and clarify other aspects of the SEC’s rulemaking authority with respect to registered investment advisers.
