The Hedge Funds Weblog
MFA on Obama’s Private Fund Investment Advisers Registration Act of 2009
Richard H. Baker, President and CEO of the Managed Funds Association (MFA) wrote a letter to MFA members this afternoon, highlighting today's announcement by the Obama Administration requiring 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 (SEC).
Baker highlights how 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 $30 million in assets under management to register with the SEC;
* 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.
See entire article and official legislation proposals
Here's a handy Hedge Fund Regulation Guide
One Comment so far ...
A key aspect of this Act is its clarification that the Commission has the authority to interpret terms of the Advisers Act, specifically including the term ‘client.’ This would in effect overrule the ruling in Goldstein vs. SEC that invalidated the Commission’s effort in 2004 to narrow the Advisers Act 203(b)(3) less-than-15-client registration exemption.
At that time, the SEC redefined client to look through a fund to the underlying investors. In Goldstein, the Court ruled that the Act was unclear on the matter and the Commission lacked that power. The language of this Act and the use of the term ‘clarify’ seem to show the intent to overcome that ruling.
If so, this Act would clear the way for the SEC to reintroduce the full-fledged hedge fund registration requirements it first adopted in 2004, including added requirements beyond the record keeping and reporting required within this proposal. The proposal includes an interesting twist that explicitly permits the SEC to “prescribe different requirements for different classes of persons and matters,” in effect, this opening things up for a very different scope and structure of regulation if the Commission wants to go that route.
I’ve posted an article with more analysis and thoughts on the proposed Act at http://hedgefundregs.com.
Comment on July 17, 2009 11:07 am