Changes

(1) IN THE SENATE OF THE UNITED STATESGENERAL.—Not later than 90 days after the date of the enactment of this Act, the Commission shall amend section 275.206(4)–1 of title 17, Code of Federal Regulations, to provide that paragraphs (a)(1) and (a)(2) of such section do not apply to an advertisement that an investment adviser publishes, circulates, or distributes solely to persons described in paragraph (2) of this subsection.

September 12(2) PERSONS DESCRIBED.—A person is described in this paragraph if such person is, 2016or the investment adviser reasonably believes such person is—

Received; read twice and referred to (A) a qualified client (as defined in section 275.205–3 of title 17, Code of Federal Regulations), determined as of the time of the Committee on Bankingpublication, Housingcirculation, and Urban Affairsor distribution of the advertisement rather than immediately prior to or after entering into the investment advisory contract referred to in such section;

To amend the Investment Advisers Act of 1940 and to direct the Securities and Exchange Commission to amend its rules to modernize certain requirements relating to investment advisers, and for other purposesSEC. 3. REMOVING DUPLICATIVE BURDENS AND APPROPRIATELY TAILORING CERTAIN REQUIREMENTS.

Be it enacted by (a) Form PF.—Not later than 90 days after the Senate and House date of Representatives the enactment of this Act, the United States Commission shall amend section 275.204(b)–1 of title 17, Code of Federal Regulations, to provide that an investment adviser to a private fund is not required to report any information beyond that which is required by sections 1a and 1b of America Form PF, unless such investment adviser is a large hedge fund adviser or a large liquidity fund adviser (as such terms are defined in Congress assembled,such Form).

SECTION 1(b) Custody Rule. SHORT TITLE—Not later than 90 days after the date of the enactment of this Act, the Commission shall amend section 275.206(4)–2 of title 17, Code of Federal Regulations, consistent with, and expanding on, IM Guidance Update No. 2013–04, titled “Privately Offered Securities under the Investment Advisers Act Custody Rule”, published by the Division of Investment Management of the Commission, with respect to the exception for certain privately offered securities in paragraph (b)(2) of such section, so as to—

This Act may be cited as (1) remove the ``Investment Advisers Modernization Act requirement of 2016''.clause (i)(B) of such paragraph (relating to the uncertificated nature and recordation of ownership of the securities); and

SEC. (2. MODERNIZING CERTAIN REQUIREMENTS RELATING TO INVESTMENT ADVISERS) remove the requirement of clause (ii) of such paragraph (relating to audit and financial statement distribution requirements with respect to securities of pooled investment vehicles).

(ac) Investment Advisory Contracts.-- (1) Assignment.-- (A) Assignment defined.--Section 202(a)(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(1)) is amended by striking ``; but'' and all that follows and inserting ``; but no assignment of an investment advisory contract shall be deemed to result from the death or withdrawal, or the sale or transfer of the interests, of a minority of the members, partners, shareholders, or other equity owners of the investment adviser having only a minority interest in the business of the investment adviser, or from the admission to the investment adviser of one or more members, partners, shareholders, or other equity owners who, after such admission, shall be only a minority of the members, partners, shareholders, or other equity owners and shall have only a minority interest in the business.''. (B) Consent to assignment by qualified clients.-- Section 205(a)(2) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-5(a)(2)) is amended by inserting before the semicolon the following: ``, except that if such other party is a qualified client (as defined in section 275.205-3 of title 17, Code of Federal Regulations, or any successor thereto), such other party may provide such consent at the time the parties enter into, extend, or renew such contract''. (2) Not required to provide for notification of change in membership of partnership.--Section 205 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-5) is amended-- (A) in subsection (a)-- (i) in paragraph (1), by striking the semicolon and inserting ``; or''; (ii) in paragraph (2), by striking ``; or'' and inserting a period; and (iii) by striking paragraph (3); and (B) in subsection (d), by striking ``paragraphs (2) and (3) of subsection (a)'' and inserting ``subsection (a)(2)''. (b) Advertising Proxy Voting Rule.-- (1) In general.--Not —Not later than 90 days after the date of the enactment of this Act, the Commission shall amend section 275.206(4)-1 –6 of title 17, Code of Federal Regulations, to provide that paragraphs (a)(1) and (a)(2) of such section do does not apply to an advertisement that an investment adviser publishes, circulates, or distributes solely any voting authority with respect to persons described in paragraph (2) of this subsection. (2) Persons described.--A person is described in this paragraph if such person is, or the investment adviser reasonably believes such person is-- (A) a qualified client (as defined in section 275.205-3 of title 17, Code of Federal Regulations), determined as of the time of the publication, circulation, or distribution of the advertisement rather than immediately prior to or after entering into the investment advisory contract referred to in such section; (B) a knowledgeable employee (as defined in section 270.3c-5 of title 17, Code of Federal Regulations) of any private fund to which the investment adviser acts as an investment adviser; (C) a qualified purchaser (as defined in section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a))); or (D) an accredited investor (as defined in section 230.501 of title 17, Code of Federal Regulations), determined as if the investment adviser were the issuer of securities referred to in such section and the time of the publication, circulation, or distribution of the advertisement were the sale of such that are not public securities.

SEC. 34. REMOVING DUPLICATIVE BURDENS AND APPROPRIATELY TAILORING CERTAIN REQUIREMENTSFACILITATING ROBUST CAPITAL FORMATION BY PREVENTING REGULATORY MISMATCH.

(a) Form PF.--Not later than 90 days after the date of the enactment of this Act, the The Commission shall amend section 275.204(b)-1 of title 17, Code of Federal Regulations, to provide that an investment adviser to a private fund is not required to report any information beyond that which is required by sections 1a and 1b of Form PF, unless such investment adviser is a large hedge fund adviser or a large liquidity fund adviser (as such terms are defined in such Form). (b) Custody Rule.--Not later than 90 days after the date of the enactment of this Act, the Commission shall amend section 275.206(4)-2 of title 17, Code of Federal Regulations, consistent with, and expanding on, IM Guidance Update No. 2013-04, titled ``Privately Offered Securities under the Investment Advisers Act Custody Rule'', published by the Division of Investment Management of the Commission, with respect to the exception for certain privately offered securities in paragraph (b)(2) of such section, so as to-- (1) remove the requirement of clause (i)(B) of such paragraph (relating to the uncertificated nature and recordation of ownership of the securities); and (2) remove the requirement of clause (ii) of such paragraph (relating to audit and financial statement distribution requirements with respect to securities of pooled investment vehicles). (c) Proxy Voting Rule.--Not later than 90 days after the date of the enactment of this Act, the Commission shall amend section 275.206(4)-6 of title 17, Code of Federal Regulations, to provide that such section does not apply to any voting authority with respect to client securities that are not public securities.may not—

SEC. 4. FACILITATING ROBUST CAPITAL FORMATION BY PREVENTING REGULATORY MISMATCH(1) amend section 230.156 of title 17, Code of Federal Regulations, to extend the provisions of such section to offerings of securities issued by private funds; or

The Commission may not-- (1) amend section 230.156 of title 17, Code of Federal Regulations, to extend the provisions of such section to offerings of securities issued by private funds; or (2) adopt rules applicable to offerings of securities issued by private funds that are substantially the same as the provisions of such section.

SEC. 5. EXCLUSION OF ADVISORY SERVICES TO REGISTERED INVESTMENT COMPANIES.

This Act shall not apply with respect to advisory services provided, or proposed to be provided, to an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 80a–1 et seq.).

In this Act, any reference to a regulation shall be construed to refer to such regulation or any successor thereto.

In this Act: (1) Public securityPUBLIC SECURITY.--The —The term ``public security'' “public security” means a security issued by an issuer that-- (A) is required to submit reports under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a); 78o(d)); or (B) has a security that is listed or traded on any exchange or organized market operating in a foreign jurisdiction. (2) Terms defined in investment advisers act of 1940.--The terms defined in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) have the meanings given such terms in such section.that—

Passed (A) is required to submit reports under section 13(a) or 15(d) of the House Securities Exchange Act of Representatives September 9, 20161934 (15 U.S.C.78m(a); 78o(d)); or

KAREN L(2) TERMS DEFINED IN INVESTMENT ADVISERS ACT OF 1940.—The terms defined in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)) have the meanings given such terms in such section. HAAS,

ClerkPassed the House of Representatives September 9, 2016.

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