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[House Report 111-686]
[From the U.S. Government Printing Office]


111th Congress                                            Rept. 111-686
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
       PRIVATE FUND INVESTMENT ADVISERS REGISTRATION ACT OF 2009

                                _______
                                

               December 16, 2010.--Ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3818]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3818) to amend the Investment Advisers Act of 
1940 to require advisers of certain unregistered investment 
companies to register with and provide information to the 
Securities and Exchange Commission, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     5
Background and Need for Legislation..............................     6
Hearings.........................................................     7
Committee Consideration..........................................     8
Committee Votes..................................................     8
Committee Oversight Findings.....................................    10
Performance Goals and Objectives.................................    10
New Budget Authority, Entitlement Authority, and Tax Expenditures    10
Committee Cost Estimate..........................................    11
Congressional Budget Office Estimate.............................    11
Federal Mandates Statement.......................................    13
Advisory Committee Statement.....................................    13
Constitutional Authority Statement...............................    13
Applicability to Legislative Branch..............................    13
Earmark Identification...........................................    13
Section-by-Section Analysis of the Legislation...................    13
Changes in Existing Law Made by the Bill, as Reported............    16

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Private Fund Investment Advisers 
Registration Act of 2009''.

SEC. 2. DEFINITIONS.

  Section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
2(a)) is amended by adding at the end the following new paragraphs:
          ``(29) Private fund.--The term `private fund' means an issuer 
        that would be an investment company under section 3(a) of the 
        Investment Company Act of 1940 (15 U.S.C. 80a-3(a)) but for the 
        exception provided from that definition by either section 
        3(c)(1) or section 3(c)(7) of such Act
          ``(30) Foreign private fund adviser.--The term `foreign 
        private fund adviser' means an investment adviser who--
                  ``(A) has no place of business in the United States;
                  ``(B) during the preceding 12 months has had--
                          ``(i) fewer than 15 clients in the United 
                        States; and
                          ``(ii) assets under management attributable 
                        to clients in the United States of less than 
                        $25,000,000, or such higher amount as the 
                        Commission may, by rule, deem appropriate in 
                        the public interest or for the protection of 
                        investors; and
                  ``(C) neither holds itself out generally to the 
                public in the United States 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 of 1940 (15 U.S.C. 80a-53) and 
                has not withdrawn such election.''.

SEC. 3. ELIMINATION OF PRIVATE ADVISER EXEMPTION; LIMITED EXEMPTION FOR 
                    FOREIGN PRIVATE FUND ADVISERS; LIMITED INTRASTATE 
                    EXEMPTION.

  Section 203(b) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
3(b)) is amended--
          (1) in paragraph (1), by inserting ``, except an investment 
        adviser who acts as an investment adviser to any private 
        fund,'' after ``any investment adviser'';
          (2) by amending paragraph (3) to read as follows:
          ``(3) any investment adviser that is a foreign private fund 
        adviser;'';
          (3) in paragraph (5), by striking ``or'' at the end;
          (4) in paragraph (6)--
                  (A) in subparagraph (A), by striking ``or'';
                  (B) in subparagraph (B), by striking the period at 
                the end and adding ``; or''; and
                  (C) by adding at the end the following new 
                subparagraph:
                  ``(C) a private fund; or''; and
          (5) by adding at the end the following:
          ``(7) any investment adviser who solely advises--
                  ``(A) small business investment companies licensed 
                under the Small Business Investment Act of 1958;
                  ``(B) entities that have received from the Small 
                Business Administration notice to proceed to qualify 
                for a license, which notice or license has not been 
                revoked; or
                  ``(C) applicants, related to one or more licensed 
                small business investment companies covered in 
                subparagraph (A), that have applied for another 
                license, which application remains pending.''.

SEC. 4. COLLECTION OF SYSTEMIC RISK DATA.

  Section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-4) 
is amended--
          (1) by redesignating subsections (b) and (c) as subsections 
        (c) and (d), respectively; and
          (2) by inserting after subsection (a) the following new 
        subsection:
  ``(b) Records and Reports of Private Funds.--
          ``(1) In general.--The Commission is authorized to require 
        any investment adviser registered under this Act to maintain 
        such records of and file with the Commission such reports 
        regarding private funds advised by the investment adviser as 
        are necessary or appropriate in the public interest and for the 
        protection of investors or for the assessment of systemic risk 
        as the Commission determines in consultation with the Board of 
        Governors of the Federal Reserve System. The Commission is 
        authorized to provide or make available to the Board of 
        Governors of the Federal Reserve System, and to any other 
        entity that the Commission identifies as having systemic risk 
        responsibility, those reports or records or the information 
        contained therein. The records and reports of any private fund, 
        to which any such investment adviser provides investment 
        advice, maintained or filed by an investment adviser registered 
        under this Act, shall be deemed to be the records and reports 
        of the investment adviser.
          ``(2) Required information.--The records and reports required 
        to be maintained or filed with the Commission under this 
        subsection shall include, for each private fund advised by the 
        investment adviser--
                  ``(A) the amount of assets under management;
                  ``(B) the use of leverage (including off-balance 
                sheet leverage);
                  ``(C) counterparty credit risk exposures;
                  ``(D) trading and investment positions;
                  ``(E) trading practices; and
                  ``(F) such other information as the Commission, in 
                consultation with the Board of Governors of the Federal 
                Reserve System, determines necessary or appropriate in 
                the public interest and for the protection of investors 
                or for the assessment of systemic risk.
          ``(3) Optional information.--The Commission may require the 
        reporting of such additional information from private fund 
        advisers as the Commission determines necessary. In making such 
        determination, the Commission, taking into account the public 
        interest and potential to contribute to systemic risk, may set 
        different reporting requirements for different classes of 
        private fund advisers, based on the particular types or sizes 
        of private funds advised by such advisers.
          ``(4) Maintenance of records.--An investment adviser 
        registered under this Act is required to maintain and keep such 
        records of private funds advised by the investment adviser for 
        such period or periods as the Commission, by rule or 
        regulation, may prescribe as necessary or appropriate in the 
        public interest and for the protection of investors or for the 
        assessment of systemic risk.
          ``(5) Examination of records.--
                  ``(A) Periodic and special examinations.--All records 
                of a private fund maintained by an investment adviser 
                registered under this Act shall be subject at any time 
                and from time to time to such periodic, special, and 
                other examinations by the Commission, or any member or 
                representative thereof, as the Commission may 
                prescribe.
                  ``(B) Availability of records.--An investment adviser 
                registered under this Act shall make available to the 
                Commission or its representatives any copies or 
                extracts from such records as may be prepared without 
                undue effort, expense, or delay as the Commission or 
                its representatives may reasonably request.
          ``(6) Information sharing.--The Commission shall make 
        available to the Board of Governors of the Federal Reserve 
        System, and to any other entity that the Commission identifies 
        as having systemic risk responsibility, copies of all reports, 
        documents, records, and information filed with or provided to 
        the Commission by an investment adviser under this subsection 
        as the Board, or such other entity, may consider necessary for 
        the purpose of assessing the systemic risk of a private fund. 
        All such reports, documents, records, and information obtained 
        by the Board, or such other entity, from the Commission under 
        this subsection shall be kept confidential in a manner 
        consistent with confidentiality established by the Commission 
        pursuant to paragraph (8).
          ``(7) Disclosures of certain private fund information.--An 
        investment adviser registered under this Act shall provide such 
        reports, records, and other documents to investors, prospective 
        investors, counterparties, and creditors, of any private fund 
        advised by the investment adviser as the Commission, by rule or 
        regulation, may prescribe as necessary or appropriate in the 
        public interest and for the protection of investors or for the 
        assessment of systemic risk.
          ``(8) Confidentiality of reports.--Notwithstanding any other 
        provision of law, the Commission shall not be compelled to 
        disclose any report or information contained therein required 
        to be filed with the Commission under this subsection. Nothing 
        in this paragraph shall authorize the Commission to withhold 
        information from the Congress or prevent the Commission from 
        complying with a request for information from any other Federal 
        department or agency or any self-regulatory organization 
        requesting the report or information for purposes within the 
        scope of its jurisdiction, or complying with an order of a 
        court of the United States in an action brought by the United 
        States or the Commission. For purposes of section 552 of title 
        5, United States Code, this paragraph shall be considered a 
        statute described in subsection (b)(3)(B) of such section.''.

SEC. 5. ELIMINATION OF DISCLOSURE PROVISION.

  Section 210 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-10) 
is amended by striking subsection (c).

SEC. 6. EXEMPTION OF AND REPORTING BY VENTURE CAPITAL FUND ADVISERS.

  Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) 
is amended by adding at the end the following new subsection:
  ``(l) Exemption of and Reporting by Venture Capital Fund Advisers.--
The Commission shall identify and define the term `venture capital 
fund' and shall provide an adviser to such a fund an exemption from the 
registration requirements under this section (excluding any such fund 
whose adviser is exempt from registration pursuant to paragraph (7) of 
subsection (b)). The Commission shall require such advisers to maintain 
such records and provide to the Commission such annual or other reports 
as the Commission determines necessary or appropriate in the public 
interest or for the protection of investors.''.

SEC. 7. EXEMPTION OF AND REPORTING BY CERTAIN PRIVATE FUND ADVISERS.

  Section 203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3), 
as amended by section 6, is further amended by adding at the end the 
following new subsections:
  ``(m) Exemption of and Reporting by Certain Private Fund Advisers.--
          ``(1) In general.--The Commission shall provide an exemption 
        from the registration requirements under this section to any 
        investment adviser of private funds, if each of such private 
        funds has assets under management in the United States of less 
        than $150,000,000.
          ``(2) Reporting.--The Commission shall require investment 
        advisers exempted by reason of this subsection to maintain such 
        records and provide to the Commission such annual or other 
        reports as the Commission determines necessary or appropriate 
        in the public interest or for the protection of investors.
  ``(n) Registration and Examination of Mid-sized Private Fund 
Advisers.--In prescribing regulations to carry out the requirements of 
this section with respect to investment advisers acting as investment 
advisers to mid-sized private funds, the Commission shall take into 
account the size, governance, and investment strategy of such funds to 
determine whether they pose systemic risk, and shall provide for 
registration and examination procedures with respect to the investment 
advisers of such funds which reflect the level of systemic risk posed 
by such funds.''.

SEC. 8. CLARIFICATION OF RULEMAKING AUTHORITY.

  Section 211 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-11) 
is amended--
          (1) by amending subsection (a) to read as follows:
  ``(a) The Commission shall have authority from time to time to make, 
issue, amend, and rescind such rules and regulations and such orders as 
are necessary or appropriate to the exercise of the functions and 
powers conferred upon the Commission elsewhere in this title, including 
rules and regulations defining technical, trade, and other terms used 
in this title. For the purposes of its rules and regulations, the 
Commission may--
          ``(1) classify persons and matters within its jurisdiction 
        based upon, but not limited to--
                  ``(A) size;
                  ``(B) scope;
                  ``(C) business model;
                  ``(D) compensation scheme; or
                  ``(E) potential to create or increase systemic risk;
          ``(2) prescribe different requirements for different classes 
        of persons or matters; and
          ``(3) ascribe different meanings to terms (including the term 
        `client', except the Commission shall not ascribe a meaning to 
        the term `client' that would include an investor in a private 
        fund managed by an investment adviser, where such private fund 
        has entered into an advisory contract with such adviser) used 
        in different sections of this title as the Commission 
        determines necessary to effect the purposes of this title.''; 
        and
          (2) by adding at the end the following new subsection:
  ``(e) The Commission and the Commodity Futures Trading Commission 
shall, after consultation with the Board of Governors of the Federal 
Reserve System, within 12 months after the date of enactment of the 
Private Fund Investment Advisers Registration Act of 2009, jointly 
promulgate rules to establish the form and content of the reports 
required to be filed with the Commission under sections 203(l) and 
204(b) and with the Commodity Futures Trading Commission by investment 
advisers that are registered both under the Investment Advisers Act of 
1940 (15 U.S.C. 80b-1 et seq.) and the Commodity Exchange Act (7 U.S.C. 
1 et seq.).''.

SEC. 9. GAO STUDY.

  (a) Study Required.--The Comptroller General of the United States 
shall carry out a study to assess the annual costs on industry members 
and their investors due to the registration requirements and ongoing 
reporting requirements under this Act and the amendments made by this 
Act.
  (b) Report to the Congress.--Not later than the end of the 2-year 
period beginning on the date of the enactment of this Act, the 
Comptroller General of the United States shall submit a report to the 
Congress containing the findings and determinations made by the 
Comptroller General in carrying out the study required under subsection 
(a).

SEC. 10. EFFECTIVE DATE; TRANSITION PERIOD.

  (a) Effective Date.--This Act, and the amendments made by this Act, 
shall take effect with respect to investment advisers after the end of 
the 1-year period beginning on the date of the enactment of this Act.
  (b) Transition Period.--The Securities and Exchange Commission shall 
prescribe rules and regulations to permit an investment adviser who 
will be required to register with the Securities and Exchange 
Commission by reason of this Act with the option of registering with 
the Securities and Exchange Commission before the date described under 
subsection (a).

SEC. 11. QUALIFIED CLIENT STANDARD.

  Section 205(e) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-
5(e)) is amended by adding at the end the following: ``With respect to 
any factor used by the Commission in making a determination under this 
subsection, if the Commission uses a dollar amount test in connection 
with such factor, such as a net asset threshold, the Commission shall, 
not later than one year after the date of the enactment of the Private 
Fund Investment Advisers Registration Act of 2009, and every 5 years 
thereafter, adjust for the effects of inflation on such test. Any such 
adjustment that is not a multiple of $1,000 shall be rounded to the 
nearest multiple of $1,000.''.

                          Purpose and Summary

    H.R. 3818, the Private Fund Investment Advisers 
Registration Act of 2009, addresses the threat of systemic and 
investor risks posed by private pools of capital. Specifically, 
the bill eliminates the existing ``private adviser'' exemption 
in the Investment Advisers Act of 1940 (IAA) commonly relied on 
by the advisers of private funds to avoid registering with the 
U.S. Securities and Exchange Commission (SEC). The legislation 
also expands the reporting requirements of investment advisers 
who advise private funds by authorizing the SEC to collect 
information from private fund advisers under two circumstances: 
first, as the SEC determines to be necessary or appropriate in 
the public interest and for the protection of investors; and 
second, as the SEC determines, in consultation with the Board 
of Governors of the Federal Reserve System, to be necessary for 
the assessment of systemic risk. The legislation further 
authorizes the SEC to share the reports of private fund 
advisers with the Federal Reserve Board and any other entity 
the SEC identifies as having systemic risk responsibility.
    Additionally, H.R. 3818 amends the IAA to remove 
impediments to the SEC's obtaining information concerning the 
identity, investments, or affairs of the investment adviser's 
clients. The bill further contains a limited exemption from 
registration for advisers of ``venture capital funds''--a term 
the SEC will define but subjects such advisers to information 
collection rules. H.R. 3818 also generally exempts from 
registration requirements the advisers of private funds, if 
each of such private funds has assets under management in the 
United States of less than $150 million, while maintaining 
reporting requirements as directed by the SEC.
    Finally, H.R. 3818 clarifies the SEC's authority to make 
rules necessary for the exercise of the powers conferred upon 
the SEC by the IAA. This includes the authority to define terms 
such as ``client'' used in different sections of the bill. 
Advisers must comply with the bill within one year of its 
enactment, although the bill allows advisers to register 
earlier with the SEC.

                  Background and Need for Legislation

    The financial crisis that erupted in the fall of 2008 
exposed numerous vulnerabilities in our present regulatory 
system for the financial services industry, including a lack of 
oversight of, and transparency with respect to, private pools 
of capital. These pools take many forms, including hedge funds, 
private equity funds, venture capital funds, and family 
offices, among others. While they offer the promise of 
increased market efficiency and job creation, these pools also 
pose potential dangers for systemic risk and investor abuse.
    In 2004, the SEC noted three emerging changes in the hedge 
fund industry that justified greater regulation, and since 
then, each trend has only intensified. First, the industry has 
experienced rapid growth. Although asset levels are down from a 
mid-2008 peak of $1.9 trillion, hedge funds alone, as of June 
30, 2009, manage an estimated $1.43 trillion in assets. Second, 
because of the ``retailization'' of hedge funds, ordinary 
investors have become exposed to the industry. Third, fraud 
actions brought against hedge funds have increased in recent 
years.
    Hedge funds and other private funds currently remain 
subject to no continuous regulatory monitoring. Because of 
minimal transparency in this sector of the financial markets, 
government authorities have limited ability to monitor and 
constrain systemic risks. The fact that private funds are 
currently subject to federal fraud laws does not address this 
regulatory gap.
    The IAA generally requires investment advisers to register 
with the SEC. Registered advisers must comply with rules 
designed to protect investors and provide transparency. These 
requirements govern areas including disclosure, conflicts of 
interest, duties to customers, marketing, and recordkeeping.
    Currently, section 203(b)(3) of the IAA offers a ``private 
adviser'' exemption to investment advisers who: (1) have had 
fewer than 15 clients during the preceding 12 months; (2) do 
not hold themselves out generally to the public as investment 
advisers; and (3) do not advise registered investment companies 
or business development companies. This exemption has become an 
escape hatch for many private advisers to avoid government 
supervision. Although many of the largest hedge fund advisers 
have voluntarily registered with the SEC, others have relied on 
this exemption to avoid ongoing and direct regulatory 
oversight.
    In an attempt to fill this gap, in 2004 the SEC promulgated 
a rule under the IAA that would have required certain fund 
managers to register. In 2006, however, a federal appellate 
court found that the SEC had exceeded its statutory authority 
and vacated the rule.
    On June 17, 2009, the Obama Administration released a white 
paper entitled Financial Regulatory Reform: A New Foundation, 
which proposes comprehensive regulatory reform for the 
financial services industry. Among other things, the white 
paper specifically calls for amending the IAA to require the 
registration with the SEC of all advisers to hedge funds and 
other private pools of capital whose assets under management 
exceed some modest threshold. In making its case for the 
registration of private fund advisers, the Administration's 
white paper notes:

          At various points in the financial crisis, de-
        leveraging by hedge funds contributed to the strain on 
        financial markets. Since these funds were not required 
        to register with regulators, however, the government 
        lacked reliable, comprehensive data with which to 
        assess this sort of market activity. In addition to the 
        need to gather information in order to assess potential 
        systemic implications of the activity of hedge funds 
        and other private pools of capital, it has also become 
        clear that there is a compelling investor protection 
        rationale to fill the gaps in the regulation of 
        investment advisors and the funds that they manage.\1\
---------------------------------------------------------------------------
    \1\See Financial Regulatory Reform: A New Foundation, p. 37, 
available at http://www.financialstability.gov/docs/regs/FinalReport--
web.pdf.

    The white paper also calls for private fund advisers to 
report information that is sufficient to assess whether the 
funds they advise pose a threat to financial stability. After 
releasing the white paper, the Administration proposed 
legislative text designed to implement its proposal for the 
registration of private fund advisers.
    On October 1, Capital Markets Subcommittee Chairman Paul E. 
Kanjorski released a discussion draft of the Private Fund 
Investment Advisers Registration Act of 2009, which he 
subsequently introduced on October 15 as H.R. 3818. Consistent 
with the Administration's request, this legislation seeks to 
close the current regulatory gap affecting the registration and 
oversight of private fund advisers while also addressing both 
investor protection and systemic risk as it relates to private 
pools of capital.

                                Hearings

    The Subcommittee on Capital Markets, Insurance, and 
Government Sponsored Enterprises held an oversight hearing 
entitled Perspectives on Hedge Fund Registration on May 7, 
2009. At the hearing, the following individuals testified:
          Mr. W. Todd Groome, Chairman, Alternative Investment 
        Management Association;
          The Honorable Richard H. Baker, President, Managed 
        Funds Association;
          Mr. James S. Chanos, Chairman, Coalition of Private 
        Investment Companies;
          Ms. Orice Williams, Director, Financial Markets and 
        Community Investment Team, Government Accountability 
        Office; and
          Mr. Britt Harris, Chief Investment Officer, Teacher 
        Retirement System of Texas.
    The Financial Services Committee subsequently held a 
legislative hearing entitled Capital Markets Regulatory Reform: 
Strengthening Investor Protection, Enhancing Oversight of 
Private Pools of Capital, and Creating a National Insurance 
Office on October 6, 2009. The second panel at this hearing 
testified about the Private Fund Investment Advisers 
Registration Act. The following witnesses participated on the 
second panel:
          Mr. Stuart J. Kaswell, Executive Vice President, 
        Managing Director, and General Counsel, Managed Funds 
        Association;
          Mr. Douglas Lowenstein, President, Private Equity 
        Council;
          Mr. James S. Chanos, Chairman, Coalition of Private 
        Investment Companies; and
          Mr. Terry McGuire, Co-Founder and General Partner, 
        Polaris Venture Partners, and Chairman, National 
        Venture Capital Association.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
October 27, 2009, and ordered H.R. 3818, Private Fund 
Investment Advisers Registration Act of 2009, as amended, 
favorably reported to the House by a record vote of 67 yeas and 
1 nay.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Frank to report the bill, as amended, to the 
House with a favorable recommendation was agreed to by a record 
vote of 67 yeas and 1 nay (Record vote no. FC-78). The names of 
Members voting for and against follow:

                                              RECORD VOTE NO. FC-78
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................        X   ........  .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................        X   ........  .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................        X   ........  .........  Mr. King (NY)....        X   ........  .........
Mrs. Maloney...................        X   ........  .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................        X   ........  .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................        X   ........  .........  Mr. Paul.........  ........        X   .........
Mr. Watt.......................        X   ........  .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................        X   ........  .........  Mr. Jones........  ........  ........  .........
Mr. Sherman....................        X   ........  .........  Mrs. Biggert.....        X   ........  .........
Mr. Meeks......................        X   ........  .........  Mr. Miller (CA)..        X   ........  .........
Mr. Moore (KS).................        X   ........  .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................        X   ........  .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................        X   ........  .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................        X   ........  .........  Mr. Barrett (SC).  ........  ........  .........
Mrs. McCarthy..................        X   ........  .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................        X   ........  .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................        X   ........  .........  Mr. Price (GA)...        X   ........  .........
Mr. Miller (NC)................        X   ........  .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................        X   ........  .........  Mr. Campbell.....        X   ........  .........
Mr. Green......................        X   ........  .........  Mr. Putnam.......        X   ........  .........
Mr. Cleaver....................        X   ........  .........  Mrs. Bachmann....        X   ........  .........
Ms. Bean.......................        X   ........  .........  Mr. Marchant.....        X   ........  .........
Ms. Moore (WI).................        X   ........  .........  Mr. McCotter.....        X   ........  .........
Mr. Hodes......................        X   ........  .........  Mr. McCarthy.....        X   ........  .........
Mr. Ellison....................        X   ........  .........  Mr. Posey........        X   ........  .........
Mr. Klein......................        X   ........  .........  Ms. Jenkins......        X   ........  .........
Mr. Wilson.....................        X   ........  .........  Mr. Lee..........        X   ........  .........
Mr. Perlmutter.................        X   ........  .........  Mr. Paulsen......        X   ........  .........
Mr. Donnelly...................        X   ........  .........  Mr. Lance........        X   ........  .........
Mr. Foster.....................        X   ........  .........  .................  ........  ........  .........
Mr. Carson.....................        X   ........  .........  .................  ........  ........  .........
Ms. Speier.....................        X   ........  .........  .................  ........  ........  .........
Mr. Childers...................        X   ........  .........  .................  ........  ........  .........
Mr. Minnick....................        X   ........  .........  .................  ........  ........  .........
Mr. Adler......................        X   ........  .........  .................  ........  ........  .........
Ms. Kilroy.....................        X   ........  .........  .................  ........  ........  .........
Mr. Driehaus...................        X   ........  .........  .................  ........  ........  .........
Ms. Kosmas.....................        X   ........  .........  .................  ........  ........  .........
Mr. Grayson....................        X   ........  .........  .................  ........  ........  .........
Mr. Himes......................        X   ........  .........  .................  ........  ........  .........
Mr. Peters.....................        X   ........  .........  .................  ........  ........  .........
Mr. Maffei.....................        X   ........  .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    During the consideration of the bill, the following 
amendment was disposed of by a record vote. The names of 
Members voting for and against follow:
    An amendment by Mr. Hensarling, no. 9, striking ``systemic 
risk,'' was not agreed to by a record vote of 24 yeas and 43 
nays (Record vote no. FC-77):

                                              RECORD VOTE NO. FC-77
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank......................  ........        X   .........  Mr. Bachus.......        X   ........  .........
Mr. Kanjorski..................  ........        X   .........  Mr. Castle.......        X   ........  .........
Ms. Waters.....................  ........        X   .........  Mr. King (NY)....        X   ........  .........
Mrs. Maloney...................  ........        X   .........  Mr. Royce........        X   ........  .........
Mr. Gutierrez..................  ........        X   .........  Mr. Lucas........        X   ........  .........
Ms. Velazquez..................  ........        X   .........  Mr. Paul.........        X   ........  .........
Mr. Watt.......................  ........        X   .........  Mr. Manzullo.....        X   ........  .........
Mr. Ackerman...................  ........        X   .........  Mr. Jones........  ........  ........  .........
Mr. Sherman....................  ........        X   .........  Mrs. Biggert.....        X   ........  .........
Mr. Meeks......................  ........        X   .........  Mr. Miller (CA)..        X   ........  .........
Mr. Moore (KS).................  ........        X   .........  Mrs. Capito......        X   ........  .........
Mr. Capuano....................  ........        X   .........  Mr. Hensarling...        X   ........  .........
Mr. Hinojosa...................  ........        X   .........  Mr. Garrett (NJ).        X   ........  .........
Mr. Clay.......................  ........        X   .........  Mr. Barrett (SC).  ........  ........  .........
Mrs. McCarthy..................  ........        X   .........  Mr. Gerlach......  ........  ........  .........
Mr. Baca.......................  ........        X   .........  Mr. Neugebauer...        X   ........  .........
Mr. Lynch......................  ........        X   .........  Mr. Price (GA)...  ........  ........  .........
Mr. Miller (NC)................  ........        X   .........  Mr. McHenry......        X   ........  .........
Mr. Scott......................  ........        X   .........  Mr. Campbell.....  ........        X   .........
Mr. Green......................  ........        X   .........  Mr. Putnam.......        X   ........  .........
Mr. Cleaver....................  ........        X   .........  Mrs. Bachmann....        X   ........  .........
Ms. Bean.......................  ........        X   .........  Mr. Marchant.....        X   ........  .........
Ms. Moore (WI).................  ........        X   .........  Mr. McCotter.....        X   ........  .........
Mr. Hodes......................  ........        X   .........  Mr. McCarthy.....        X   ........  .........
Mr. Ellison....................  ........        X   .........  Mr. Posey........        X   ........  .........
Mr. Klein......................  ........        X   .........  Ms. Jenkins......        X   ........  .........
Mr. Wilson.....................  ........        X   .........  Mr. Lee..........        X   ........  .........
Mr. Perlmutter.................  ........        X   .........  Mr. Paulsen......        X   ........  .........
Mr. Donnelly...................  ........        X   .........  Mr. Lance........        X   ........  .........
Mr. Foster.....................  ........        X   .........  .................  ........  ........  .........
Mr. Carson.....................  ........        X   .........  .................  ........  ........  .........
Ms. Speier.....................  ........        X   .........  .................  ........  ........  .........
Mr. Childers...................  ........        X   .........  .................  ........  ........  .........
Mr. Minnick....................  ........        X   .........  .................  ........  ........  .........
Mr. Adler......................  ........        X   .........  .................  ........  ........  .........
Ms. Kilroy.....................  ........        X   .........  .................  ........  ........  .........
Mr. Driehaus...................  ........        X   .........  .................  ........  ........  .........
Ms. Kosmas.....................  ........        X   .........  .................  ........  ........  .........
Mr. Grayson....................  ........        X   .........  .................  ........  ........  .........
Mr. Himes......................  ........        X   .........  .................  ........  ........  .........
Mr. Peters.....................  ........        X   .........  .................  ........  ........  .........
Mr. Maffei.....................  ........        X   .........  .................  ........  ........  .........
----------------------------------------------------------------------------------------------------------------

    The following other amendments were also considered by the 
Committee:
    An amendment by Mr. Kanjorski (and Mr. Frank), no. 1, 
manager's amendment, was agreed to by voice vote.
    An amendment by Mr. Bachus, no. 2, regarding the definition 
of ``client'', was agreed to by voice vote.
    An amendment by Mr. Peters, no. 3, regarding exemption of 
and reporting by certain private fund advisers, was offered and 
withdrawn.
    An amendment by Mr. Garrett, no. 4, regarding a GAO study, 
was agreed to by voice vote.
    An amendment by Ms. Kosmas, no. 5, regarding transition 
period and effective date, was agreed to by voice vote.
    An amendment by Mrs. Capito (and Mr. Paulsen), no. 6, 
regarding small business advisory exemption, was agreed to by 
voice vote.
    An amendment by Mr. Lucas, no. 7, regarding commodity 
trading advisers exemption, was offered and withdrawn.
    An amendment by Mr. Hensarling, no. 8, regarding exemption 
of hedge fund advisers, was not agreed to by voice vote.
    An amendment by Mrs. Bachmann, no. 10, regarding transition 
rule, was agreed to by voice vote.
    An amendment by Mr. McCarthy (CA), no. 11, striking 
consultation with the Federal Reserve, was not agreed to by 
voice vote.
    An amendment by Mr. Himes, no. 12, regarding qualified 
client standard, was agreed to by voice vote.
    An amendment by Mr. Peters (and Mr. Meeks and Mr. Garrett), 
no. 13, regarding exemption and reporting by certain private 
fund advisers, was agreed to by voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 3818 aims to increase the number of advisers in the 
securities industry who must register with the SEC under the 
Investment Advisers Act of 1940 in order to improve regulatory 
access to information about the participants in and performance 
of the capital markets, decrease the likelihood of systemic 
risk, and enhance investor protection.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 13, 2009.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3818, the Private 
Fund Investment Advisers Registration Act of 2009.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 3818--Private Fund Investment Advisers Registration Act of 2009

    Summary: H.R. 3818 would require individuals and 
organizations that provide investment advice to private 
investment funds to register with the Securities and Exchange 
Commission (SEC). The bill would authorize the SEC to exempt 
advisers that provide services to venture capital funds from 
registration requirements. H.R. 3818 also would require the 
Government Accountability Office (GAO) to prepare a report to 
the Congress on the annual costs of the new registration and 
reporting requirements to investment advisers and their 
clients.
    Based on information from the SEC, CBO estimates that 
implementing the provisions of H.R. 3818 would cost $140 
million over the 2010-2014 period, assuming appropriation of 
the necessary amounts. CBO estimates that enacting H.R. 3818 
would not affect revenues or direct spending.
    H.R. 3818 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    By placing new requirements on investment advisers of 
private investment firms, H.R. 3818 would impose private-sector 
mandates, as defined in UMRA. Based on information from the SEC 
and industry sources, CBO estimates that the aggregate cost of 
complying with the mandates would not exceed the annual 
threshold established in UMRA for private-sector mandates ($139 
million in 2009, adjusted annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3818 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                              --------------------------------------------------
                                                                2010    2011    2012    2013    2014   2010-2014
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level................................       9      29      36      36      37        147
Estimated Outlays............................................       7      26      35      36      36        140
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: Based on information from the SEC, CBO 
estimates that the SEC would add 150 employees by fiscal year 
2011 to write regulations and undertake the additional 
examination and enforcement activities required by the bill 
(about a 4 percent increase over its 2009 staffing levels). 
Assuming appropriation of the necessary amounts, CBO estimates 
that implementing H.R. 3818 would cost $140 million over the 
2010-2014 period. That amount would cover the cost of salaries 
and benefits, overhead, preparation of reports, and upgrades to 
information technology systems. CBO estimates that enacting 
H.R. 3818 would not affect revenues or direct spending.
    Estimated impact on State, local, and tribal governments: 
H.R. 3818 contains no intergovernmental mandates as defined in 
UMRA and would not affect the budgets of state, local, or 
tribal governments.
    Estimated impact on the private sector: H.R. 3818 would 
impose private-sector mandates, as defined in UMRA, on 
individuals and firms that provide investment advice to private 
investment funds. Based on information from the SEC and 
industry sources, CBO estimates that the aggregate cost of 
complying with the mandates would not exceed the annual 
threshold established in UMRA for private-sector mandates ($139 
million in 2009, adjusted annually for inflation).
    The bill would require investment advisers of hedge funds 
and private equity firms to register with the SEC. The advisers 
would be subject to existing SEC requirements for registered 
funds. Approximately 1,300 investment advisers would be 
affected by the new registration requirements. According to 
industry experts, the expenses for those advisers to prepare 
for the registration process would average less than $30,000 
per firm. Advisers also would incur ongoing costs to comply 
with SEC requirements. Based upon information from industry 
sources and the SEC, CBO estimates that the cost of the mandate 
would be small relative to the annual threshold.
    Additionally, the bill would require all investment 
advisers for private funds to maintain records and provide to 
the SEC, if requested, certain financial information related to 
the assets held by the firm. Industry sources and the SEC 
indicate that the information required under the bill is 
readily available to most firms. Therefore, CBO estimates this 
mandate would not require firms to incur significant costs.
    Estimate approved by: Federal Costs: Susan Willie; Impact 
on State, Local, and Tribal Governments: Elizabeth Cove 
Delisle; Impact on the Private Sector: Samuel Wice and Paige 
Piper/Bach.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 3818 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    The section designates the title of the bill as the 
``Private Fund Investment Advisers Registration Act of 2009''.

Section 2. Definitions

    This section amends the Investment Advisers Act of 1940 
(IAA) by adding definitions for ``private fund'' and ``foreign 
private fund adviser''.

Section 3. Elimination of private adviser exemption; limited exemption 
        for foreign private fund advisers; limited intrastate exemption

    This section eliminates the IAA's existing private adviser 
exemption, which exempts from registration investment advisers 
that have fewer than 15 clients, do not hold themselves out to 
the public as investment advisers, and do not act as investment 
advisers to registered investment companies or business 
development companies. This section additionally creates a 
limited exemption for foreign private fund advisers. Finally, 
the section exempts any investment adviser who only advises 
either licensed small business investment companies, related 
applicants for other licenses, or funds that have received 
Small Business Administration notice to proceed to qualify for 
a license.
    As a consequence of repealing Section 203(b)(3) of the 
Investment Advisers Act, the bill may require a number of 
professionals that provide advice to members of a single family 
(i.e., ``family offices'') to register as investment advisers. 
The SEC, however, has previously issued a number of orders 
deeming family offices not to be investment advisers and thus 
not subject to the Investment Advisers Act, including its 
registration provisions. The SEC may continue to issue such 
orders for advisers of family offices that apply for 
consideration if the SEC determines that the exemption is 
permissible under the statute.
    Although the amendments to Section 203(b)(3) are intended 
to expand registration requirements to a broader range of 
companies, the amendments are not intended to affect investment 
advisers that are exempt from registration under Section 
203(b)(2). Thus, registration would not be required for a 
wholly owned subsidiary within an affiliated group of insurance 
companies that is established and operated for the sole purpose 
of providing investment advisory services to the members of the 
affiliated group of insurance companies, and does not hold 
itself out to the public as an investment adviser.

Section 4. Collection of systemic risk data

    This section amends the IAA by authorizing the SEC to 
require registered investment advisers to maintain records of, 
and file reports about, the private funds they advise in two 
instances: first, as the SEC determines is necessary or 
appropriate in the public interest and for the protection of 
investors; and second, as the SEC determines, in consultation 
with the Federal Reserve Board and any other entity that the 
SEC identifies as having systemic risk responsibility, to be 
necessary for the assessment of systemic risk. The records and 
reports of any private fund are further deemed to be the 
records and reports of the registered investment adviser.
    The section enumerates certain types of required 
information for the reports--for example, the amount of assets 
under management, the use of leverage, and counterparty credit 
risk exposures, among others--and authorizes the SEC to require 
such other information as the SEC, in consultation with the 
Federal Reserve Board, determines to be necessary or 
appropriate in the public interest and for the protection of 
investors or for the assessment of systemic risk. The section 
further permits the SEC to require the reporting of different 
information from different classes of private advisers, based 
on the particular types or sizes of private funds advised by 
such advisers. The SEC may also require the reporting of such 
additional information from private fund advisers as the agency 
determines necessary. It is intended that the SEC, when making 
rules, will take into consideration the risk associated with 
various types of funds and scale their requirements to that 
risk.
    The section further sets forth requirements related to the 
maintenance of records and the periodic and special examination 
by the SEC of such records. Investment advisers shall also make 
available to the SEC or its representatives any copies or 
extracts from such records as may be prepared without undue 
effort, expense, or delay as the SEC or its representatives may 
reasonably request.
    The section additionally requires the SEC to share these 
records and reports with the Federal Reserve Board and any 
other entity that the SEC identifies as having a systemic risk 
responsibility. The confidentiality of these shared records is 
protected.
    This section also gives the SEC the authority to prescribe, 
by rule or regulation, that investment advisers shall provide 
reports, records and other documents to the investors, 
prospective investors, creditors, and counterparties of the 
private funds they advise. Finally, the section provides that 
the SEC shall not be compelled to disclose any report that 
advisers provide to the SEC under this section, or any 
information contained within such report; but the SEC may 
neither withhold such information from Congress nor decline 
requests for information from any Federal department or agency 
or any self-regulatory organization when acting in its 
jurisdiction.

Section 5. Elimination of disclosure provision

    This section amends the IAA to remove a provision that 
generally bars the SEC from requiring investment advisers to 
disclose the identity, investments, or affairs of their 
clients.

Section 6. Exemption of and reporting by venture capital fund advisers

    This section amends the IAA by authorizing the SEC to 
define ``venture capital fund'' and provides a new exemption 
for the advisers of venture capital funds. The section also 
authorizes the SEC to require the advisers to venture capital 
funds to maintain records and provide reports as the SEC deems 
appropriate to protect investors or in the public interest.

Section 7. Exemption of and reporting by certain private fund advisers

    This section requires the SEC to exempt from registration 
an investment adviser of private funds, if each of such funds 
has assets under management in the United States of less than 
$150 million. Nevertheless, these investment advisers must 
maintain records and provide to the SEC such annual or other 
reports as the SEC deems necessary or appropriate in the public 
interest or for investor protection. The SEC is also authorized 
to take into account the size, governance, and investment 
strategy of a fund to determine if the fund poses a systemic 
risk. The SEC can provide registration and examination 
procedures based on this finding.

Section 8. Clarification of rulemaking authority

    This section addresses the authority to make rules 
necessary for the exercise of the SEC's powers under the IAA. 
This rulemaking power includes the ability to give different 
meanings to terms, including ``client'', used in different 
sections of the IAA. The definition of ``client'' will not 
include the investor in a private fund managed by an investment 
adviser, where the private fund has entered into an advisory 
contract with such adviser. Additionally, the section directs 
the SEC and the Commodity Futures Trading Commission to jointly 
issue rules to establish the form and content of required 
reports for investment advisers dually registered under the IAA 
and the Commodity Exchange Act.

Section 9. GAO study

    This section authorizes a study by the Comptroller General 
of the United States to assess the annual cost of registration 
requirements and ongoing reporting requirements under the 
legislation. Study findings must be reported to Congress no 
later than 2 years from the enactment of the bill.

Section 10. Effective date; transition period

    This section outlines the timeline for compliance with this 
bill. Covered investment advisers must register with the SEC 
within one year of the bill's enactment, but the SEC through 
rulemaking can give investment advisers the option to register 
earlier.

Section 11. Qualified client standard

    This section states that the SEC must adjust for the 
effects of inflation on any dollar amount used in making 
determinations (for example, net asset threshold) under 
subsection 205(e) of the Investment Advisers Act. This 
adjustment must be made no later than one year after enactment 
and every five years thereafter.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                    INVESTMENT ADVISERS ACT OF 1940

TITLE II--INVESTMENT ADVISERS

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 202. (a) When used in this title, unless the context 
otherwise requires, the following definitions shall apply:
          (1) * * *

           *       *       *       *       *       *       *

          (29) Private fund.--The term ``private fund'' means 
        an issuer that would be an investment company under 
        section 3(a) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-3(a)) but for the exception provided from 
        that definition by either section 3(c)(1) or section 
        3(c)(7) of such Act.
          (30) Foreign private fund adviser.--The term 
        ``foreign private fund adviser'' means an investment 
        adviser who--
                  (A) has no place of business in the United 
                States;
                  (B) during the preceding 12 months has had--
                          (i) fewer than 15 clients in the 
                        United States; and
                          (ii) assets under management 
                        attributable to clients in the United 
                        States of less than $25,000,000, or 
                        such higher amount as the Commission 
                        may, by rule, deem appropriate in the 
                        public interest or for the protection 
                        of investors; and
                  (C) neither holds itself out generally to the 
                public in the United States 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 of 1940 (15 U.S.C. 80a-
                53) and has not withdrawn such election.

           *       *       *       *       *       *       *


                  REGISTRATION OF INVESTMENT ADVISERS

  Sec. 203. (a) * * *
  (b) The provisions of subsection (a) shall not apply to--
          (1) any investment adviser, except an investment 
        adviser who acts as an investment adviser to any 
        private fund, all of whose clients are residents of the 
        State within which such investment adviser maintains 
        his or its principal office and place of business, and 
        who does not furnish advice or issue analyses or 
        reports with respect to securities listed or admitted 
        to unlisted trading privileges on any national 
        securities exchange;

           *       *       *       *       *       *       *

          [(3) any investment adviser who during the course of 
        the preceding twelve months has had fewer than fifteen 
        clients and who neither holds himself out generally to 
        the public as an investment adviser nor acts as an 
        investment adviser to any investment company registered 
        under title I of this Act, or a company which has 
        elected to be a business development company pursuant 
        to section 54 of title I of this Act and has not 
        withdrawn its election. For purposes of determining the 
        number of clients of an investment adviser under this 
        paragraph, no shareholder, partner, or beneficial owner 
        of a business development company, as defined in this 
        title, shall be deemed to be a client of such 
        investment adviser unless such person is a client of 
        such investment adviser separate and apart from his 
        status as a shareholder, partner, or beneficial owner;]
          (3) any investment adviser that is a foreign private 
        fund adviser;

           *       *       *       *       *       *       *

          (5) any plan described in section 414(e) of the 
        Internal Revenue Code of 1986, any person or entity 
        eligible to establish and maintain such a plan under 
        the Internal Revenue Code of 1986, or any trustee, 
        director, officer, or employee of or volunteer for any 
        such plan or person, if such person or entity, acting 
        in such capacity, provides investment advice 
        exclusively to, or with respect to, any plan, person, 
        or entity or any company, account, or fund that is 
        excluded from the definition of an investment company 
        under section 3(c)(14) of the Investment Company Act of 
        1940; [or]
          (6) any investment adviser that is registered with 
        the Commodity Futures Trading Commission as a commodity 
        trading advisor whose business does not consist 
        primarily of acting as an investment adviser, as 
        defined in section 202(a)(11) of this title, and that 
        does not act as an investment adviser to--
                  (A) an investment company registered under 
                title I of this Act; [or]
                  (B) a company which has elected to be a 
                business development company pursuant to 
                section 54 of title I of this Act and has not 
                withdrawn its election[.]; or
                  (C) a private fund; or
          (7) any investment adviser who solely advises--
                  (A) small business investment companies 
                licensed under the Small Business Investment 
                Act of 1958;
                  (B) entities that have received from the 
                Small Business Administration notice to proceed 
                to qualify for a license, which notice or 
                license has not been revoked; or
                  (C) applicants, related to one or more 
                licensed small business investment companies 
                covered in subparagraph (A), that have applied 
                for another license, which application remains 
                pending.

           *       *       *       *       *       *       *

  (l) Exemption of and Reporting by Venture Capital Fund 
Advisers.--The Commission shall identify and define the term 
``venture capital fund'' and shall provide an adviser to such a 
fund an exemption from the registration requirements under this 
section (excluding any such fund whose adviser is exempt from 
registration pursuant to paragraph (7) of subsection (b)). The 
Commission shall require such advisers to maintain such records 
and provide to the Commission such annual or other reports as 
the Commission determines necessary or appropriate in the 
public interest or for the protection of investors.
  (m) Exemption of and Reporting by Certain Private Fund 
Advisers.--
          (1) In general.--The Commission shall provide an 
        exemption from the registration requirements under this 
        section to any investment adviser of private funds, if 
        each of such private funds has assets under management 
        in the United States of less than $150,000,000.
          (2) Reporting.--The Commission shall require 
        investment advisers exempted by reason of this 
        subsection to maintain such records and provide to the 
        Commission such annual or other reports as the 
        Commission determines necessary or appropriate in the 
        public interest or for the protection of investors.
  (n) Registration and Examination of Mid-Sized Private Fund 
Advisers.--In prescribing regulations to carry out the 
requirements of this section with respect to investment 
advisers acting as investment advisers to mid-sized private 
funds, the Commission shall take into account the size, 
governance, and investment strategy of such funds to determine 
whether they pose systemic risk, and shall provide for 
registration and examination procedures with respect to the 
investment advisers of such funds which reflect the level of 
systemic risk posed by such funds.

           *       *       *       *       *       *       *


                        ANNUAL AND OTHER REPORTS

  Sec. 204. (a) * * *
  (b) Records and Reports of Private Funds.--
          (1) In general.--The Commission is authorized to 
        require any investment adviser registered under this 
        Act to maintain such records of and file with the 
        Commission such reports regarding private funds advised 
        by the investment adviser as are necessary or 
        appropriate in the public interest and for the 
        protection of investors or for the assessment of 
        systemic risk as the Commission determines in 
        consultation with the Board of Governors of the Federal 
        Reserve System. The Commission is authorized to provide 
        or make available to the Board of Governors of the 
        Federal Reserve System, and to any other entity that 
        the Commission identifies as having systemic risk 
        responsibility, those reports or records or the 
        information contained therein. The records and reports 
        of any private fund, to which any such investment 
        adviser provides investment advice, maintained or filed 
        by an investment adviser registered under this Act, 
        shall be deemed to be the records and reports of the 
        investment adviser.
          (2) Required information.--The records and reports 
        required to be maintained or filed with the Commission 
        under this subsection shall include, for each private 
        fund advised by the investment adviser--
                  (A) the amount of assets under management;
                  (B) the use of leverage (including off-
                balance sheet leverage);
                  (C) counterparty credit risk exposures;
                  (D) trading and investment positions;
                  (E) trading practices; and
                  (F) such other information as the Commission, 
                in consultation with the Board of Governors of 
                the Federal Reserve System, determines 
                necessary or appropriate in the public interest 
                and for the protection of investors or for the 
                assessment of systemic risk.
          (3) Optional information.--The Commission may require 
        the reporting of such additional information from 
        private fund advisers as the Commission determines 
        necessary. In making such determination, the 
        Commission, taking into account the public interest and 
        potential to contribute to systemic risk, may set 
        different reporting requirements for different classes 
        of private fund advisers, based on the particular types 
        or sizes of private funds advised by such advisers.
          (4) Maintenance of records.--An investment adviser 
        registered under this Act is required to maintain and 
        keep such records of private funds advised by the 
        investment adviser for such period or periods as the 
        Commission, by rule or regulation, may prescribe as 
        necessary or appropriate in the public interest and for 
        the protection of investors or for the assessment of 
        systemic risk.
          (5) Examination of records.--
                  (A) Periodic and special examinations.--All 
                records of a private fund maintained by an 
                investment adviser registered under this Act 
                shall be subject at any time and from time to 
                time to such periodic, special, and other 
                examinations by the Commission, or any member 
                or representative thereof, as the Commission 
                may prescribe.
                  (B) Availability of records.--An investment 
                adviser registered under this Act shall make 
                available to the Commission or its 
                representatives any copies or extracts from 
                such records as may be prepared without undue 
                effort, expense, or delay as the Commission or 
                its representatives may reasonably request.
          (6) Information sharing.--The Commission shall make 
        available to the Board of Governors of the Federal 
        Reserve System, and to any other entity that the 
        Commission identifies as having systemic risk 
        responsibility, copies of all reports, documents, 
        records, and information filed with or provided to the 
        Commission by an investment adviser under this 
        subsection as the Board, or such other entity, may 
        consider necessary for the purpose of assessing the 
        systemic risk of a private fund. All such reports, 
        documents, records, and information obtained by the 
        Board, or such other entity, from the Commission under 
        this subsection shall be kept confidential in a manner 
        consistent with confidentiality established by the 
        Commission pursuant to paragraph (8).
          (7) Disclosures of certain private fund 
        information.--An investment adviser registered under 
        this Act shall provide such reports, records, and other 
        documents to investors, prospective investors, 
        counterparties, and creditors, of any private fund 
        advised by the investment adviser as the Commission, by 
        rule or regulation, may prescribe as necessary or 
        appropriate in the public interest and for the 
        protection of investors or for the assessment of 
        systemic risk.
          (8) Confidentiality of reports.--Notwithstanding any 
        other provision of law, the Commission shall not be 
        compelled to disclose any report or information 
        contained therein required to be filed with the 
        Commission under this subsection. Nothing in this 
        paragraph shall authorize the Commission to withhold 
        information from the Congress or prevent the Commission 
        from complying with a request for information from any 
        other Federal department or agency or any self-
        regulatory organization requesting the report or 
        information for purposes within the scope of its 
        jurisdiction, or complying with an order of a court of 
        the United States in an action brought by the United 
        States or the Commission. For purposes of section 552 
        of title 5, United States Code, this paragraph shall be 
        considered a statute described in subsection (b)(3)(B) 
        of such section.
  [(b)] (c) Filing Depositories.--The Commission may, by rule, 
require an investment adviser--
          (1) * * *

           *       *       *       *       *       *       *

  [(c)] (d) Access to Disciplinary and Other Information.--
          (1) * * *

           *       *       *       *       *       *       *


                     INVESTMENT ADVISORY CONTRACTS

  Sec. 205. (a) * * *

           *       *       *       *       *       *       *

  (e) The Commission, by rule or regulation, upon its own 
motion, or by order upon application, may conditionally or 
unconditionally exempt any person or transaction, or any class 
or classes of persons or transactions, from subsection (a)(1), 
if and to the extent that the exemption relates to an 
investment advisory contract with any person that the 
Commission determines does not need the protections of 
subsection (a)(1), on the basis of such factors as financial 
sophistication, net worth, knowledge of and experience in 
financial matters, amount of assets under management, 
relationship with a registered investment adviser, and such 
other factors as the Commission determines are consistent with 
this section. With respect to any factor used by the Commission 
in making a determination under this subsection, if the 
Commission uses a dollar amount test in connection with such 
factor, such as a net asset threshold, the Commission shall, 
not later than one year after the date of the enactment of the 
Private Fund Investment Advisers Registration Act of 2009, and 
every 5 years thereafter, adjust for the effects of inflation 
on such test. Any such adjustment that is not a multiple of 
$1,000 shall be rounded to the nearest multiple of $1,000.

           *       *       *       *       *       *       *


                               PUBLICITY

  Sec. 210. (a) * * *

           *       *       *       *       *       *       *

  [(c) No provision of this title shall be construed to 
require, or to authorize the Commission to require any 
investment adviser engaged in rendering investment supervisory 
services to disclose the identity, investments, or affairs of 
any client of such investment adviser, except insofar as such 
disclosure may be necessary or appropriate in a particular 
proceeding or investigation having as its object the 
enforcement of a provision or provisions of this title.]

           *       *       *       *       *       *       *


                     RULES, REGULATIONS, AND ORDERS

  Sec. 211. [(a) The Commission shall have authority from time 
to time to make, issue, amend, and rescind such rules and 
regulations and such orders as are necessary or appropriate to 
the exercise of the functions and powers conferred upon the 
Commission elsewhere in this title. For the purposes of its 
rules or regulations the Commission may classify persons and 
matters within its jurisdiction and prescribe different 
requirements for different classes of persons or matters.] (a) 
The Commission shall have authority from time to time to make, 
issue, amend, and rescind such rules and regulations and such 
orders as are necessary or appropriate to the exercise of the 
functions and powers conferred upon the Commission elsewhere in 
this title, including rules and regulations defining technical, 
trade, and other terms used in this title. For the purposes of 
its rules and regulations, the Commission may--
          (1) classify persons and matters within its 
        jurisdiction based upon, but not limited to--
                  (A) size;
                  (B) scope;
                  (C) business model;
                  (D) compensation scheme; or
                  (E) potential to create or increase systemic 
                risk;
          (2) prescribe different requirements for different 
        classes of persons or matters; and
          (3) ascribe different meanings to terms (including 
        the term ``client'', except the Commission shall not 
        ascribe a meaning to the term ``client'' that would 
        include an investor in a private fund managed by an 
        investment adviser, where such private fund has entered 
        into an advisory contract with such adviser) used in 
        different sections of this title as the Commission 
        determines necessary to effect the purposes of this 
        title.

           *       *       *       *       *       *       *

  (e) The Commission and the Commodity Futures Trading 
Commission shall, after consultation with the Board of 
Governors of the Federal Reserve System, within 12 months after 
the date of enactment of the Private Fund Investment Advisers 
Registration Act of 2009, jointly promulgate rules to establish 
the form and content of the reports required to be filed with 
the Commission under sections 203(l) and 204(b) and with the 
Commodity Futures Trading Commission by investment advisers 
that are registered both under the Investment Advisers Act of 
1940 (15 U.S.C. 80b-1 et seq.) and the Commodity Exchange Act 
(7 U.S.C. 1 et seq.).

           *       *       *       *       *       *       *


                                  
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