On July 15, 2009, the Obama administration delivered to Congress proposed legislation that would subject most investment advisers of hedge funds and private equity and venture capital funds ("private investment funds") to registration, compliance and reporting requirements.

The proposed legislation is entitled the Private Fund Investment Advisers Registration Act of 2009 (the "Act"). If enacted, it will require private investment fund advisers managing more than $30 million in assets to register with the SEC. In addition, these advisers will be required to do the following:

  • File records and reports with the SEC that will include information such as a fund's amount of assets under management, use of leverage (including off-balance sheet leverage), counterparty credit risk exposures, trading and investment positions, trading practices, and such other information as the SEC may determine to be necessary for the protection of investors or for the assessment of systemic risk;
  • Provide fund investors and others with such records and reports as the SEC may require by rule;
  • Submit to periodic or special SEC regulatory examinations; and
  • Establish comprehensive compliance programs, which will include adopting codes of ethics and appointing chief compliance officers.  

Although the Act provides for confidentiality with respect to information in records and reports submitted by private fund advisers to the SEC, it also authorizes the SEC to share such records and reports with the Federal Reserve System and the Financial Services Oversight Council for the purpose of assessing the systemic risk in the global financial system.

The Act further provides that, within six months after the date of its enactment, the SEC and the Commodity Futures Trading Commission, after consultation with the Federal Reserve System, will promulgate rules establishing the forms of reports required to be filed under the Act.

The full text of the bill is available at http://www.ustreas.gov/press/releases/tg214.htm. Click on the "Legislative Language" link at the bottom of the page.