This memorandum contains a brief update on pending investment adviser registration legislation discussed in our September 2009 Alert1. On October 1, Representative Paul E. Kanjorski (D-PA), chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, issued a discussion draft of the Private Fund Investment Advisers Registration Act of 2009 (Kanjorski Bill), which was considered to be the product of bipartisan cooperation. The bill was introduced in the House on October 15 as H.R. 3818 and was marked up on October 27. The full text of the revised bill is expected in early November. The Kanjorski Bill was approved 67-1 by the House Financial Services Committee on October 27 and now proceeds to the House for a final vote, most likely as part of a broader financial reform package.
The Kanjorski Bill closely resembles the Treasury Bill in many respects. Both bills propose to: (i) eliminate the current “private adviser”2 exemption from the Securities and Exchange Commission (SEC) registration and substituting in its place an exemption for “foreign private advisers;” (ii) authorize the SEC to collect systemic risk data; (iii) eliminate the disclosure provision in Section 210(c) of the Investment Advisers Act of 1940 (Advisers Act); and (iv) clarify the SEC’s rulemaking authority under Section 211 of the Advisers Act.
The major differences between the Kanjorski Bill (as marked-up on October 27) and the Treasury Bill include:
extending the Kanjorski Bill's registration requirements to advisers to foreign funds;
increasing the threshold amount of assets under management that would trigger registration requirements from $30 million to $150 million, by exempting from the registration requirement advisers to funds in which each such fund has less than $150 million of assets under management;
exempting advisers to venture capital funds and small business investment companies from the bill’s registration requirements; and
providing more specific guidance to the SEC as to how it would be permitted to classify persons and matters within its jurisdiction for purposes of its rulemaking authority under the bill.
1 The September 2009 alert reports on and analyzes the Private Fund Investment Advisers Registration Act of 2009 (Treasury Bill) submitted by the Obama administration to Congress on July 15, and briefly reviewed other bills submitted earlier this year by Senator Jack Reed (D-RI), Congressman Mike Castle (R-DE) and Congressman Barney Frank (D-MA), among others.
2 The “private adviser” exemption is for investment advisers who have less than 15 clients and do not hold themselves out to the public as investment advisers or act as investment advisers to any registered investment company or business development company.