On December 11, 2009, the U.S. House of Representatives passed comprehensive legislation designed to regulate the financial markets. This memo provides a brief overview of the Private Fund Investment Advisers Registration Act of 2009 (the “Act”), the provision that is most relevant to private fund advisers.

Private Fund Investment Advisers Registration Act of 2009

The Act:

• eliminates the current private adviser exemption from SEC registration for investment advisers with fewer than 15 clients;
• provides a limited exemption for a “foreign private adviser” that (i) has no place of business in the U.S., (ii) during the preceding 12 months had fewer than 15 clients in the U.S. and less than $25 million in assets under management attributable to clients in the U.S.; and (iii) does not hold itself out to the public in the U.S. as an investment adviser, or advise an investment company registered under the Investment Company Act of 1940 or a business development company;
• provides an exemption from registration for an investment adviser to a venture capital fund (to be defined by the SEC), but not for an investment adviser to a private equity fund;
• directs the SEC to adopt rules establishing an exemption from registration for an investment adviser to “private funds”, if each private fund advised has assets under management in the United States of less than $150 million (the Act currently provides that this exemption would be based on the assets of each private fund rather than the adviser’s aggregate assets under management); and
• subjects registered investment advisers to new reporting and recordkeeping requirements about the private funds that they manage, which the SEC would have the authority to share with the Federal Reserve and other agencies.

The Wall Street Reform and Consumer Protection Act is still subject to a vote by the U.S. Senate. Seward & Kissel will be monitoring the progress of this and other proposed financial regulatory reform legislation and will provide updated information as it becomes available.

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If you have any questions with respect to the foregoing, please contact your primary attorney in the Investment Management Group at Seward & Kissel LLP.

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¹ See our November 6, 2009 memorandum on the Foreign Account Tax Compliance Act of 2009.