Will Private Fund Investment Advisers be Subject to Increased SEC Oversight?

Today, the House Financial Services Committee passed H.R. 3818, the Private Fund Investment Advisers Registration Act, by a vote of 67-1. Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises is the sponsor of the bill as well as H.R. 3817, the Investor Protection Act. (See our previous posting on the Investor Protection Act.)
“The Private Fund Investment Advisers Registration Act, will force many more financial providers to register with the Securities and Exchange Commission,” said Chairman Kanjorski. “The past year has shown that the deregulation or in many cases, lack of regulation, of financial firms is an idea of the past. Advisors to financial firms must receive government oversight and we must understand the assets of financial firms, including for hedge funds, private equity firms, and other private pools of capital. Under this legislation, private investment funds would become subject to more scrutiny by the SEC.”

Key components of H.R. 3818 are:

Everyone Registers. Chairman Kanjorski believes that mandating the registration of private advisers to private pools of capital regulators will shed light on how those entities operate and whether their actions pose a threat to the financial system as a whole.

More Regulatory Disclosures. H.R. 3817 proposes new and more extensive recordkeeping and disclosure requirements for private advisers. Regulators will have the authority to examine records of investment advisers that were previously not covered under regulatory rules.

So, the federal regulatory overhaul of our financial system continues. Little by little, Congress formulates the changes to come. Are you aware of the changes being proposed and how they affect you and your firm’s business model? At this critical juncture having someone in your corner, with knowledge and experience, will be one of the best proactive steps a firm can take facing these changes. It reminds me of the old school yard chant, “Around and around we go where we stop nobody knows”