A one-sentence bill introduced to the US House of Representatives seeks to strike Section 203(b)(3) of the Investment Advisers Act of 1940 (the "Advisers Act"), commonly known as the "private adviser exemption," in its entirety. Unregistered private fund managers currently rely on Section 203(b)(3) to avoid registration with the SEC.

The Hedge Fund Adviser Registration Act was proposed by Reps. Michael Castle (R-De.) and Michael Capuano (D-Ma.) on Feb. 2, a few days after Sens. Charles Grassley (R-Ia.) and Carl Levin (D-Mi.) introduced the Hedge Fund Transparency Act (HFTA) in the Senate. Though the HFTA does not seek to amend the Advisers Act, it would also require investment advisers to register if passed because they would cease to satisfy the requirements of Section 203(b)(3).

Castle and Capuano also introduced a bill that would require pension funds to disclose plan investments in hedge funds, and a bill that would require the President's Working Group to undertake a study on the hedge fund industry within 180 days of passage.

Press Release: Castle Introduces Hedgefund Reform Package, Mike Castle website (Feb. 2, 2009)

Full Text is available here.

Related Alert: Hedge Fund Transparency Act to Increase Government Oversight of Hedge Funds (Feb. 2, 2009) (PDF)