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114-HR5424 Investment Advisers Modernization Act (view source)
Revision as of 16:24, 5 April 2017
, 16:24, 5 April 2017Created page with "{{Legislation |Has title=114-HR5424 Investment Advisers Modernization Act |Proposed in=114 |Sponsored by=Rep. Hurt, Robert (R-VA-5) |Reviewing committee=House Financial Servic..."
{{Legislation
|Has title=114-HR5424 Investment Advisers Modernization Act
|Proposed in=114
|Sponsored by=Rep. Hurt, Robert (R-VA-5)
|Reviewing committee=House Financial Services
|Has bill status=Died
|Has keywords=McCarthy
}}
This bill directs the Securities and Exchange Commission (SEC) to amend specified regulations for investment advisers as they apply to private equity firms and private investment funds.
===Sec. 2===
The bill revises the disclaimer that, in the case of an investment adviser that is a partnership, an assignment shall not be deemed to result from the death, withdrawal, sale or transfer of minority interests to apply the disclaimer also to minority members, shareholders, for other equity owners of the investment adviser. Qualified clients of an investment adviser may consent to an assignment of the investment adviser contract at the time they enter into an advisory contract.
The Investment Advisers Act of 1940 is amended to repeal the requirement that advisers organized as partnerships notify the other party to an investment adviser contract every time there is a change in the composition of the partnership.
The SEC shall waive the application of specified antifraud prohibitions to advisers who advertise exclusively to:
*qualified clients, determined as of the time of the publication, circulation, or distribution of the advertisement rather than immediately before or after entering into the investment advisory contract;
*knowledgeable employees of any private fund to which the investment adviser acts as an investment adviser;
qualified purchasers; or
*accredited investors (determined as if the investment adviser were the securities issuer and the time of the publication, circulation, or distribution of the advertisement were the sale of such securities).
===Sec. 3===
The SEC must amend a certain regulation regarding Form PF which registered investment advisers with at least $150 million in private funds assets under management must file with the SEC to report information about the private funds that they manage. This amendment shall state 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 it is a large hedge fund adviser or a large liquidity fund adviser.
The SEC shall also amend the regulation requiring that client funds and securities of which an investment adviser has custody are verified by actual examination periodically by an independent public accountant.
The SEC shall amend the proxy voting regulation to waive its application to any voting authority exercised by an investment adviser regarding client securities that are not public securities.
===Sec. 4===
On the other hand, the SEC may not:
amend a specified regulation to extend its requirements and prohibitions concerning investment company sales literature to offerings of securities issued by private funds, or
adopt substantially similar rules applicable to such offerings.
===Sec. 5===
This bill shall not apply to advisory services supplied to an investment company registered under the Investment Company Act of 1940.
===Sec. 6===
Any regulation referred to in this bill includes any successor regulation.
==Bill Text==
Congressional Bills 114th Congress
From the U.S. Government Publishing Office
H.R. 5424 Referred in Senate (RFS)
114th CONGRESS
2d Session
H. R. 5424
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 12, 2016
Received; read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
AN ACT
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
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Investment Advisers Modernization
Act of 2016''.
SEC. 2. MODERNIZING CERTAIN REQUIREMENTS RELATING TO INVESTMENT
ADVISERS.
(a) 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 Rule.--
(1) In general.--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.
(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 securities.
SEC. 3. REMOVING DUPLICATIVE BURDENS AND APPROPRIATELY TAILORING
CERTAIN REQUIREMENTS.
(a) Form PF.--Not later than 90 days after the date of the
enactment of this Act, 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.
SEC. 4. FACILITATING ROBUST CAPITAL FORMATION BY PREVENTING REGULATORY
MISMATCH.
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 et
seq.).
SEC. 6. REFERENCES TO REGULATIONS.
In this Act, any reference to a regulation shall be construed to
refer to such regulation or any successor thereto.
SEC. 7. DEFINITIONS.
In this Act:
(1) Public security.--The term ``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.
Passed the House of Representatives September 9, 2016.
Attest:
KAREN L. HAAS,
Clerk.
==Resources==
[https://www.congress.gov/bill/114th-congress/house-bill/5424 Link to bill page]
|Has title=114-HR5424 Investment Advisers Modernization Act
|Proposed in=114
|Sponsored by=Rep. Hurt, Robert (R-VA-5)
|Reviewing committee=House Financial Services
|Has bill status=Died
|Has keywords=McCarthy
}}
This bill directs the Securities and Exchange Commission (SEC) to amend specified regulations for investment advisers as they apply to private equity firms and private investment funds.
===Sec. 2===
The bill revises the disclaimer that, in the case of an investment adviser that is a partnership, an assignment shall not be deemed to result from the death, withdrawal, sale or transfer of minority interests to apply the disclaimer also to minority members, shareholders, for other equity owners of the investment adviser. Qualified clients of an investment adviser may consent to an assignment of the investment adviser contract at the time they enter into an advisory contract.
The Investment Advisers Act of 1940 is amended to repeal the requirement that advisers organized as partnerships notify the other party to an investment adviser contract every time there is a change in the composition of the partnership.
The SEC shall waive the application of specified antifraud prohibitions to advisers who advertise exclusively to:
*qualified clients, determined as of the time of the publication, circulation, or distribution of the advertisement rather than immediately before or after entering into the investment advisory contract;
*knowledgeable employees of any private fund to which the investment adviser acts as an investment adviser;
qualified purchasers; or
*accredited investors (determined as if the investment adviser were the securities issuer and the time of the publication, circulation, or distribution of the advertisement were the sale of such securities).
===Sec. 3===
The SEC must amend a certain regulation regarding Form PF which registered investment advisers with at least $150 million in private funds assets under management must file with the SEC to report information about the private funds that they manage. This amendment shall state 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 it is a large hedge fund adviser or a large liquidity fund adviser.
The SEC shall also amend the regulation requiring that client funds and securities of which an investment adviser has custody are verified by actual examination periodically by an independent public accountant.
The SEC shall amend the proxy voting regulation to waive its application to any voting authority exercised by an investment adviser regarding client securities that are not public securities.
===Sec. 4===
On the other hand, the SEC may not:
amend a specified regulation to extend its requirements and prohibitions concerning investment company sales literature to offerings of securities issued by private funds, or
adopt substantially similar rules applicable to such offerings.
===Sec. 5===
This bill shall not apply to advisory services supplied to an investment company registered under the Investment Company Act of 1940.
===Sec. 6===
Any regulation referred to in this bill includes any successor regulation.
==Bill Text==
Congressional Bills 114th Congress
From the U.S. Government Publishing Office
H.R. 5424 Referred in Senate (RFS)
114th CONGRESS
2d Session
H. R. 5424
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 12, 2016
Received; read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
AN ACT
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
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Investment Advisers Modernization
Act of 2016''.
SEC. 2. MODERNIZING CERTAIN REQUIREMENTS RELATING TO INVESTMENT
ADVISERS.
(a) 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 Rule.--
(1) In general.--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.
(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 securities.
SEC. 3. REMOVING DUPLICATIVE BURDENS AND APPROPRIATELY TAILORING
CERTAIN REQUIREMENTS.
(a) Form PF.--Not later than 90 days after the date of the
enactment of this Act, 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.
SEC. 4. FACILITATING ROBUST CAPITAL FORMATION BY PREVENTING REGULATORY
MISMATCH.
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 et
seq.).
SEC. 6. REFERENCES TO REGULATIONS.
In this Act, any reference to a regulation shall be construed to
refer to such regulation or any successor thereto.
SEC. 7. DEFINITIONS.
In this Act:
(1) Public security.--The term ``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.
Passed the House of Representatives September 9, 2016.
Attest:
KAREN L. HAAS,
Clerk.
==Resources==
[https://www.congress.gov/bill/114th-congress/house-bill/5424 Link to bill page]
