On June 16, U.S. Senator Jack Reed introduced the Private Fund Transparency Act of 2009 that proposes to amend the Investment Advisers Act of 1940 by eliminating the “private adviser” exemption from registration. Currently, an investment advisor with fewer than fifteen clients that neither holds itself out generally to the public as an investment advisor nor acts as an investment advisor to any registered investment company is exempt from registration with the Securities and Exchange Commission. If passed in its current form, an investment advisor with a single client, or an investment advisor that manages a single hedge fund, private equity fund or other pooled investment vehicle, would be required to register with the SEC if the investment advisor had more $30 million under management. In place of the private advisor exemption, the bill would create a new exemption for a “foreign private adviser” that (i) has no place of business in the United States; (ii) has fewer than 15 clients in the United States; (iii) has assets under management attributable to clients in the United States of less than $25,000,000; and (iv) neither holds itself out generally to the public in the United States as an investment advisor, nor acts as an investment advisor to any registered investment company. The bill also would give the SEC the authority to require registered investment advisors to maintain records and submit reports to relevant federal agencies, including keeping such records and submitting any required reports with respect to any private funds advised by the registered advisor, to apply different requirements to different classes of persons and to ascribe meanings to terms in the Act (such as the term “client”) used in different sections in any manner it sees fit.

To view the text of the bill click here.