IB 

Union Calendar No. 407 

111TH CONGRESS 

2D SESSION H. R. 3818 

[Report No. 111–686, Part I] 

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. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 15, 2009 

Mr. KANJORSKI introduced the following bill; which was referred to the 

Committee on Financial Services 

DECEMBER 16, 2010 

Reported with an amendment, and referred to the Committee on Agriculture 

for a period ending not later than December 17, 2010, for consideration 

of such provisions of the bill and amendment as fall within the jurisdiction of that committee pursuant to clause 1(a) of rule X 

[Strike out all after the enacting clause and insert the part printed in italic] 

DECEMBER 17, 2010 

Committee on Agriculture discharged; committed to the Committee of the 

Whole House on the State of the Union and ordered to be printed 

[For text of introduced bill, see copy of bill as introduced on October 15, 2009] 


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A BILL 

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. 


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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Private Fund Invest5 ment Advisers Registration Act of 2009’’. 

6 SEC. 2. DEFINITIONS. 

7 Section 202(a) of the Investment Advisers Act of 1940 

8 (15 U.S.C. 80b-2(a)) is amended by adding at the end the 

9 following new paragraphs: 

10 ‘‘(29) PRIVATE FUND.—The term ‘private fund’ 

11 means an issuer that would be an investment com12 pany under section 3(a) of the Investment Company 

13 Act of 1940 (15 U.S.C. 80a-3(a)) but for the exception 

14 provided from that definition by either section 3(c)(1) 

15 or section 3(c)(7) of such Act 

16 ‘‘(30) FOREIGN PRIVATE FUND ADVISER.—The 

17 term ‘foreign private fund adviser’ means an invest18 ment adviser who— 

19 ‘‘(A) has no place of business in the United 

20 States; 

21 ‘‘(B) during the preceding 12 months has 

22 had— 

23 ‘‘(i) fewer than 15 clients in the 

24 United States; and 


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1 ‘‘(ii) assets under management attrib2 utable to clients in the United States of less 

3 than $25,000,000, or such higher amount as 

4 the Commission may, by rule, deem appro5 priate in the public interest or for the pro6 tection of investors; and 

7 ‘‘(C) neither holds itself out generally to the 

8 public in the United States as an investment ad9 viser, nor acts as an investment adviser to any 

10 investment company registered under the Invest11 ment Company Act of 1940, or a company which 

12 has elected to be a business development com13 pany pursuant to section 54 of the Investment 

14 Company Act of 1940 (15 U.S.C. 80a-53) and 

15 has not withdrawn such election.’’. 

16 SEC. 3. ELIMINATION OF PRIVATE ADVISER EXEMPTION; 

17 LIMITED EXEMPTION FOR FOREIGN PRIVATE 

18 FUND ADVISERS; LIMITED INTRASTATE EX19 EMPTION. 

20 Section 203(b) of the Investment Advisers Act of 1940 

21 (15 U.S.C. 80b-3(b)) is amended— 

22 (1) in paragraph (1), by inserting ‘‘, except an 

23 investment adviser who acts as an investment adviser 

24 to any private fund,’’ after ‘‘any investment adviser’’; 


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1 (2) by amending paragraph (3) to read as fol2 lows: 

3 ‘‘(3) any investment adviser that is a foreign 

4 private fund adviser;’’; 

5 (3) in paragraph (5), by striking ‘‘or’’ at the 

6 end; 

7 (4) in paragraph (6)— 

8 (A) in subparagraph (A), by striking ‘‘or’’; 

9 (B) in subparagraph (B), by striking the 

10 period at the end and adding ‘‘; or’’; and 

11 (C) by adding at the end the following new 

12 subparagraph: 

13 ‘‘(C) a private fund; or’’; and 

14 (5) by adding at the end the following: 

15 ‘‘(7) any investment adviser who solely advises— 

16 ‘‘(A) small business investment companies 

17 licensed under the Small Business Investment 

18 Act of 1958; 

19 ‘‘(B) entities that have received from the 

20 Small Business Administration notice to proceed 

21 to qualify for a license, which notice or license 

22 has not been revoked; or 

23 ‘‘(C) applicants, related to one or more li24 censed small business investment companies cov25 ered in subparagraph (A), that have applied for 


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1 another license, which application remains pend2 ing.’’. 

3 SEC. 4. COLLECTION OF SYSTEMIC RISK DATA. 

4 Section 204 of the Investment Advisers Act of 1940 (15 

5 U.S.C. 80b-4) is amended— 

6 (1) by redesignating subsections (b) and (c) as 

7 subsections (c) and (d), respectively; and 

8 (2) by inserting after subsection (a) the following 

9 new subsection: 

10 ‘‘(b) RECORDS AND REPORTS OF PRIVATE FUNDS.— 

11 ‘‘(1) IN GENERAL.—The Commission is author12 ized to require any investment adviser registered 

13 under this Act to maintain such records of and file 

14 with the Commission such reports regarding private 

15 funds advised by the investment adviser as are nec16 essary or appropriate in the public interest and for 

17 the protection of investors or for the assessment of sys18 temic risk as the Commission determines in consulta19 tion with the Board of Governors of the Federal Re20 serve System. The Commission is authorized to pro21 vide or make available to the Board of Governors of 

22 the Federal Reserve System, and to any other entity 

23 that the Commission identifies as having systemic 

24 risk responsibility, those reports or records or the in25 formation contained therein. The records and reports 


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1 of any private fund, to which any such investment 

2 adviser provides investment advice, maintained or 

3 filed by an investment adviser registered under this 

4 Act, shall be deemed to be the records and reports of 

5 the investment adviser. 

6 ‘‘(2) REQUIRED INFORMATION.—The records and 

7 reports required to be maintained or filed with the 

8 Commission under this subsection shall include, for 

9 each private fund advised by the investment ad10 viser— 

11 ‘‘(A) the amount of assets under manage12 ment; 

13 ‘‘(B) the use of leverage (including off-bal14 ance sheet leverage); 

15 ‘‘(C) counterparty credit risk exposures; 

16 ‘‘(D) trading and investment positions; 

17 ‘‘(E) trading practices; and 

18 ‘‘(F) such other information as the Commis19 sion, in consultation with the Board of Gov20 ernors of the Federal Reserve System, determines 

21 necessary or appropriate in the public interest 

22 and for the protection of investors or for the as23 sessment of systemic risk. 

24 ‘‘(3) OPTIONAL INFORMATION.—The Commission 

25 may require the reporting of such additional informaVerDate Mar 15 2010 22:38 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6203 E:\BILLS\H3818.RH H3818

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1 tion from private fund advisers as the Commission 

2 determines necessary. In making such determination, 

3 the Commission, taking into account the public inter4 est and potential to contribute to systemic risk, may 

5 set different reporting requirements for different class6 es of private fund advisers, based on the particular 

7 types or sizes of private funds advised by such advis8 ers. 

9 ‘‘(4) MAINTENANCE OF RECORDS.—An invest10 ment adviser registered under this Act is required to 

11 maintain and keep such records of private funds ad12 vised by the investment adviser for such period or pe13 riods as the Commission, by rule or regulation, may 

14 prescribe as necessary or appropriate in the public 

15 interest and for the protection of investors or for the 

16 assessment of systemic risk. 

17 ‘‘(5) EXAMINATION OF RECORDS.— 

18 ‘‘(A) PERIODIC AND SPECIAL EXAMINA19 TIONS.—All records of a private fund main20 tained by an investment adviser registered under 

21 this Act shall be subject at any time and from 

22 time to time to such periodic, special, and other 

23 examinations by the Commission, or any mem24 ber or representative thereof, as the Commission 

25 may prescribe. 


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1 ‘‘(B) AVAILABILITY OF RECORDS.—An in2 vestment adviser registered under this Act shall 

3 make available to the Commission or its rep4 resentatives any copies or extracts from such 

5 records as may be prepared without undue effort, 

6 expense, or delay as the Commission or its rep7 resentatives may reasonably request. 

8 ‘‘(6) INFORMATION SHARING.—The Commission 

9 shall make available to the Board of Governors of the 

10 Federal Reserve System, and to any other entity that 

11 the Commission identifies as having systemic risk re12 sponsibility, copies of all reports, documents, records, 

13 and information filed with or provided to the Com14 mission by an investment adviser under this sub15 section as the Board, or such other entity, may con16 sider necessary for the purpose of assessing the sys17 temic risk of a private fund. All such reports, docu18 ments, records, and information obtained by the 

19 Board, or such other entity, from the Commission 

20 under this subsection shall be kept confidential in a 

21 manner consistent with confidentiality established by 

22 the Commission pursuant to paragraph (8). 

23 ‘‘(7) DISCLOSURES OF CERTAIN PRIVATE FUND

24 INFORMATION.—An investment adviser registered 

25 under this Act shall provide such reports, records, and 


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1 other documents to investors, prospective investors, 

2 counterparties, and creditors, of any private fund ad3 vised by the investment adviser as the Commission, 

4 by rule or regulation, may prescribe as necessary or 

5 appropriate in the public interest and for the protec6 tion of investors or for the assessment of systemic risk. 

7 ‘‘(8) CONFIDENTIALITY OF REPORTS.—Notwith8 standing any other provision of law, the Commission 

9 shall not be compelled to disclose any report or infor10 mation contained therein required to be filed with the 

11 Commission under this subsection. Nothing in this 

12 paragraph shall authorize the Commission to with13 hold information from the Congress or prevent the 

14 Commission from complying with a request for infor15 mation from any other Federal department or agency 

16 or any self-regulatory organization requesting the re17 port or information for purposes within the scope of 

18 its jurisdiction, or complying with an order of a court 

19 of the United States in an action brought by the 

20 United States or the Commission. For purposes of sec21 tion 552 of title 5, United States Code, this para22 graph shall be considered a statute described in sub23 section (b)(3)(B) of such section.’’. 


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1 SEC. 5. ELIMINATION OF DISCLOSURE PROVISION. 

2 Section 210 of the Investment Advisers Act of 1940 (15 

3 U.S.C. 80b-10) is amended by striking subsection (c). 

4 SEC. 6. EXEMPTION OF AND REPORTING BY VENTURE CAP5 ITAL FUND ADVISERS. 

6 Section 203 of the Investment Advisers Act of 1940 (15 

7 U.S.C. 80b-3) is amended by adding at the end the fol8 lowing new subsection: 

9 ‘‘(l) EXEMPTION OF AND REPORTING BY VENTURE

10 CAPITAL FUND ADVISERS.—The Commission shall identify 

11 and define the term ‘venture capital fund’ and shall provide 

12 an adviser to such a fund an exemption from the registra13 tion requirements under this section (excluding any such 

14 fund whose adviser is exempt from registration pursuant 

15 to paragraph (7) of subsection (b)). The Commission shall 

16 require such advisers to maintain such records and provide 

17 to the Commission such annual or other reports as the Com18 mission determines necessary or appropriate in the public 

19 interest or for the protection of investors.’’. 

20 SEC. 7. EXEMPTION OF AND REPORTING BY CERTAIN PRI21 VATE FUND ADVISERS. 

22 Section 203 of the Investment Advisers Act of 1940 (15 

23 U.S.C. 80b-3), as amended by section 6, is further amended 

24 by adding at the end the following new subsections: 

25 ‘‘(m) EXEMPTION OF AND REPORTING BY CERTAIN

26 PRIVATE FUND ADVISERS.— 


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1 ‘‘(1) IN GENERAL.—The Commission shall pro2 vide an exemption from the registration requirements 

3 under this section to any investment adviser of pri4 vate funds, if each of such private funds has assets 

5 under management in the United States of less than 

6 $150,000,000. 

7 ‘‘(2) REPORTING.—The Commission shall require 

8 investment advisers exempted by reason of this sub9 section to maintain such records and provide to the 

10 Commission such annual or other reports as the Com11 mission determines necessary or appropriate in the 

12 public interest or for the protection of investors. 

13 ‘‘(n) REGISTRATION AND EXAMINATION OF MID-SIZED

14 PRIVATE FUND ADVISERS.—In prescribing regulations to 

15 carry out the requirements of this section with respect to 

16 investment advisers acting as investment advisers to mid17 sized private funds, the Commission shall take into account 

18 the size, governance, and investment strategy of such funds 

19 to determine whether they pose systemic risk, and shall pro20 vide for registration and examination procedures with re21 spect to the investment advisers of such funds which reflect 

22 the level of systemic risk posed by such funds.’’. 

23 SEC. 8. CLARIFICATION OF RULEMAKING AUTHORITY. 

24 Section 211 of the Investment Advisers Act of 1940 (15 

25 U.S.C. 80b-11) is amended— 


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1 (1) by amending subsection (a) to read as fol2 lows: 

3 ‘‘(a) The Commission shall have authority from time 

4 to time to make, issue, amend, and rescind such rules and 

5 regulations and such orders as are necessary or appropriate 

6 to the exercise of the functions and powers conferred upon 

7 the Commission elsewhere in this title, including rules and 

8 regulations defining technical, trade, and other terms used 

9 in this title. For the purposes of its rules and regulations, 

10 the Commission may— 

11 ‘‘(1) classify persons and matters within its ju12 risdiction based upon, but not limited to— 

13 ‘‘(A) size; 

14 ‘‘(B) scope; 

15 ‘‘(C) business model; 

16 ‘‘(D) compensation scheme; or 

17 ‘‘(E) potential to create or increase systemic 

18 risk; 

19 ‘‘(2) prescribe different requirements for different 

20 classes of persons or matters; and 

21 ‘‘(3) ascribe different meanings to terms (includ22 ing the term ‘client’, except the Commission shall not 

23 ascribe a meaning to the term ‘client’ that would in24 clude an investor in a private fund managed by an 

25 investment adviser, where such private fund has enVerDate Mar 15 2010 22:38 Dec 17, 2010 Jkt 099200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6203 E:\BILLS\H3818.RH H3818

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1 tered into an advisory contract with such adviser) 

2 used in different sections of this title as the Commis3 sion determines necessary to effect the purposes of this 

4 title.’’; and 

5 (2) by adding at the end the following new sub6 section: 

7 ‘‘(e) The Commission and the Commodity Futures 

8 Trading Commission shall, after consultation with the 

9 Board of Governors of the Federal Reserve System, within 

10 12 months after the date of enactment of the Private Fund 

11 Investment Advisers Registration Act of 2009, jointly pro12 mulgate rules to establish the form and content of the re13 ports required to be filed with the Commission under sec14 tions 203(l) and 204(b) and with the Commodity Futures 

15 Trading Commission by investment advisers that are reg16 istered both under the Investment Advisers Act of 1940 (15 

17 U.S.C. 80b-1 et seq.) and the Commodity Exchange Act (7 

18 U.S.C. 1 et seq.).’’. 

19 SEC. 9. GAO STUDY. 

20 (a) STUDY REQUIRED.—The Comptroller General of 

21 the United States shall carry out a study to assess the an22 nual costs on industry members and their investors due to 

23 the registration requirements and ongoing reporting re24 quirements under this Act and the amendments made by 

25 this Act. 


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1 (b) REPORT TO THE CONGRESS.—Not later than the 

2 end of the 2-year period beginning on the date of the enact3 ment of this Act, the Comptroller General of the United 

4 States shall submit a report to the Congress containing the 

5 findings and determinations made by the Comptroller Gen6 eral in carrying out the study required under subsection 

7 (a). 

8 SEC. 10. EFFECTIVE DATE; TRANSITION PERIOD. 

9 (a) EFFECTIVE DATE.—This Act, and the amendments 

10 made by this Act, shall take effect with respect to investment 

11 advisers after the end of the 1-year period beginning on the 

12 date of the enactment of this Act. 

13 (b) TRANSITION PERIOD.—The Securities and Ex14 change Commission shall prescribe rules and regulations to 

15 permit an investment adviser who will be required to reg16 ister with the Securities and Exchange Commission by rea17 son of this Act with the option of registering with the Secu18 rities and Exchange Commission before the date described 

19 under subsection (a). 

20 SEC. 11. QUALIFIED CLIENT STANDARD. 

21 Section 205(e) of the Investment Advisers Act of 1940 

22 (15 U.S.C. 80b-5(e)) is amended by adding at the end the 

23 following: ‘‘With respect to any factor used by the Commis24 sion in making a determination under this subsection, if 

25 the Commission uses a dollar amount test in connection 


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1 with such factor, such as a net asset threshold, the Commis2 sion shall, not later than one year after the date of the en3 actment of the Private Fund Investment Advisers Registra4 tion Act of 2009, and every 5 years thereafter, adjust for 

5 the effects of inflation on such test. Any such adjustment 

6 that is not a multiple of $1,000 shall be rounded to the 

7 nearest multiple of $1,000.’’. 


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Union Calendar No. 407 

111TH CONGRESS 

2D SESSION H. R. 3818 

[Report No. 111–686, Part I] 

A BILL 

To amend the Investment Advisers Act of 1940 to 

mission, and for other purposes. formation to the Securities and Exchange Comment companies to register with and provide inrequire advisers of certain unregistered investDECEMBER 17, 2010 

Committee on Agriculture discharged; committed to the 

Union and ordered to be printed Committee of the Whole House on the State of the 


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