Kanjorski Bill Requires Private Fund Adviser Registration; Allows SEC Disclosure Rules

Congressman Paul Kanjorski, the Chairman of a powerful House subcommittee on financial services regulation, proposed legislation that would require 3(c)(1) and 3(c)(7) fund adviser to register under the Advisers Act. The proposed legislation authorizes the SEC to mandate reporting of information about the funds themselves including assets under management, leverage, investment positions, and credit risk. The legislation also authorizes the SEC to mandate disclosures to investors. The legislation will include an exemption from registration for “venture capital fund” advisers, as defined by the SEC.

OUR TAKE: The legislation does not address whether a private fund adviser with fewer than 15 clients could avoid registration. It also does not address whether state registration would be required if the fund has less than $25 Million in assets. We suspect that the option to regulate disclosure to investors will spawn a new “investment company lite” regulatory regime for private funds.

http://www.house.gov/apps/list/press/financialsvcs_dem/private_advisers_act_draft.pdf