Hedge fund managers will lose their principal exemption from investment adviser registration with the Securities and Exchange Commission (the “SEC”) under bills passed by both houses of Congress. It appears that venture capital fund managers will be able to remain exempt from SEC registration, while the fate of private equity fund managers is unknown – to be decided in conference between House and Senate leaders.

A larger number of advisers who are required to register will remain subject to State laws because the threshold for SEC registration will be raised. Also, all advisers, possibly including exempt fund managers, will be required to provide a substantial amount of information to the SEC.

These changes are contained in legislation adopted, with some differences, by the U.S. House and Senate.1 The Senate Bill and the House Bill will now proceed to a House-Senate conference committee to reconcile the numerous differences between the two bills. The final legislation could be ready for President Obama’s signature by early July.

The Senate Bill provides exemptions for advisers to venture capital funds, private equity funds and family offices, to be defined by the SEC within six months after the final legislation is enacted. The House Bill also provides an exemption for advisers to venture capital funds (to be defined by the SEC), but not for private equity fund managers.

Outlined on the following pages is a brief summary of the portions of the ­Senate Bill and the House Bill that relate to private investment funds and their advisers.

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