The Private Fund Transparency Act of 2009 (the "PFTA"), which was introduced by Sen. Jack Reed (D-RI) on June 16, is the third bill introduced in Congress in the last six months that would require the great majority of private fund advisers to register with the Securities and Exchange Commission (the "SEC"). The PFTA follows the Hedge Fund Adviser Registration Act of 2009, introduced in the US House of Representatives on January 27, and the Hedge Fund Transparency Act, introduced in the US Senate on January 29. Of the three bills, the PFTA is the most closely aligned with the proposed private fund regulations included in the Obama administration's comprehensive regulatory plan that was released on June 17.
The PFTA would require investment advisers that manage more than US$30 million in assets to register as investment advisers with the SEC (the remaining smaller advisers would remain under state oversight), impose certain confidential disclosure and record-keeping requirements and further amend the Investment Advisers Act of 1940 to clarify and strengthen the SEC's authority to oversee registered investment advisers. Similarly, the Obama plan recommends that advisers to hedge funds, private equity funds, venture capital funds and other private pools of capital, whose assets exceed a certain threshold, should be required to register with the SEC under the Advisers Act.
The PFTA would also authorize the SEC to require registered advisers to maintain records and submit reports as are necessary or appropriate to supervise systemic risk, which would include records of any private funds that are managed by such advisers. Private fund data collection and maintenance of records requirements are also key components of the Obama plan.
The PFTA exempts from registration a "foreign private adviser," defined as any investment adviser who (A) has no place of business in the US; (B) during the preceding 12 months has had (i) fewer than 15 clients in the US and (ii) assets under management attributable to clients in the US of less than US$25 million, or such higher amount as the SEC may, by rule, deem appropriate in accordance with the purposes of this title and (C) neither holds itself out generally to the public in the US 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, and has not withdrawn its election.
The fate of the PFTA is uncertain in light of the new private fund proposals included in the Obama plan. We will continue to monitor the bill's progress.
Proposed Bill: Private Fund Transparency Act of 2009 (June 16, 2009) (HTML)
Story: Reed Introduces Bill That Would Require Hedge Fund Advisers to Register with SEC, 41 Sec. Reg. L. Rep. 1152 (June 22, 2009)
The Obama Plan is available here (PDF)
Related Alert on the Obama Plan: President Obama Unveils Plan to Reshape Financial Regulation (June 22, 2009) (PDF)
Related Alert on the Hedge Fund Transparency Act: Hedge Fund Transparency Act to Increase Government Oversight of Hedge Funds (February 2, 2009) (PDF)