Difference between revisions of "114-HR5424 Investment Advisers Modernization Act"

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(Created 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...")
 
 
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|Proposed in=114
 
|Proposed in=114
 
|Sponsored by=Rep. Hurt, Robert (R-VA-5)
 
|Sponsored by=Rep. Hurt, Robert (R-VA-5)
|Reviewing committee=House Financial Services
+
|Reviewing committee=House - Financial Services
 
|Has bill status=Died
 
|Has bill status=Died
 
|Has keywords=McCarthy
 
|Has keywords=McCarthy
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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.
 
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===
+
====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 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.
  
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*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).
 
*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===
+
====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 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.
  
Line 27: Line 27:
 
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.
 
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===
+
====Sec. 4====
 
On the other hand, the SEC may not:
 
On the other hand, the SEC may not:
  
Line 33: Line 33:
 
adopt substantially similar rules applicable to such offerings.
 
adopt substantially similar rules applicable to such offerings.
  
===Sec. 5===
+
====Sec. 5====
 
This bill shall not apply to advisory services supplied to an investment company registered under the Investment Company Act of 1940.
 
This bill shall not apply to advisory services supplied to an investment company registered under the Investment Company Act of 1940.
  
===Sec. 6===
+
====Sec. 6====
 
Any regulation referred to in this bill includes any successor regulation.
 
Any regulation referred to in this bill includes any successor regulation.
  
 
==Bill Text==
 
==Bill Text==
Congressional Bills 114th Congress
 
From the U.S. Government Publishing Office
 
H.R. 5424 Referred in Senate (RFS)
 
 
 
114th CONGRESS
 
114th CONGRESS
 
2d Session
 
2d Session
 
H. R. 5424
 
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”.
  
                  IN THE SENATE OF THE UNITED STATES
+
SEC. 2. MODERNIZING CERTAIN REQUIREMENTS RELATING TO INVESTMENT ADVISERS.
  
                          September 12, 2016
+
(a) Investment Advisory Contracts.—
  
Received; read twice and referred to the Committee on Banking, Housing,
+
(1) ASSIGNMENT.—
                          and Urban Affairs
 
  
_______________________________________________________________________
+
(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.”.
  
                                AN ACT
+
(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)—
    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
+
(i) in paragraph (1), by striking the semicolon and inserting “; or”;
United States of America in Congress assembled,
 
  
SECTION 1. SHORT TITLE.
+
(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—
  
    This Act may be cited as the ``Investment Advisers Modernization
+
(1) remove the requirement of clause (i)(B) of such paragraph (relating to the uncertificated nature and recordation of ownership of the securities); and
Act of 2016''.
 
  
SEC. 2. MODERNIZING CERTAIN REQUIREMENTS RELATING TO INVESTMENT
+
(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).
              ADVISERS.
 
  
    (a) Investment Advisory Contracts.--
+
(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.
            (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
+
SEC. 4. FACILITATING ROBUST CAPITAL FORMATION BY PREVENTING REGULATORY MISMATCH.
              CERTAIN REQUIREMENTS.
 
  
    (a) Form PF.--Not later than 90 days after the date of the
+
The Commission may not—
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
+
(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
              MISMATCH.
 
  
    The Commission may not--
+
(2) adopt rules applicable to offerings of securities issued by private funds that are substantially the same as the provisions of such section.
            (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  
+
SEC. 5. EXCLUSION OF ADVISORY SERVICES TO REGISTERED INVESTMENT COMPANIES.
              COMPANIES.
 
  
    This Act shall not apply with respect to advisory services  
+
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.).
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.
 
SEC. 6. REFERENCES TO REGULATIONS.
  
    In this Act, any reference to a regulation shall be construed to  
+
In this Act, any reference to a regulation shall be construed to refer to such regulation or any successor thereto.
refer to such regulation or any successor thereto.
 
  
 
SEC. 7. DEFINITIONS.
 
SEC. 7. DEFINITIONS.
  
    In this Act:
+
In this Act:
            (1) Public security.--The term ``public security'' means a  
+
 
        security issued by an issuer that--
+
(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.
+
(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
  
            Attest:
+
(B) has a security that is listed or traded on any exchange or organized market operating in a foreign jurisdiction.
  
                                                KAREN L. HAAS,
+
(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.
  
                                                                Clerk.
+
Passed the House of Representatives September 9, 2016.
  
 +
Attest: karen l. haas, 
 +
Clerk
  
 
==Resources==
 
==Resources==
 
[https://www.congress.gov/bill/114th-congress/house-bill/5424 Link to bill page]
 
[https://www.congress.gov/bill/114th-congress/house-bill/5424 Link to bill page]
 +
 +
[[Category: McCarthy]]

Latest revision as of 11:22, 14 April 2017

Legislation
Title 114-HR5424 Investment Advisers Modernization Act
Congress 114
Sponsor Rep. Hurt, Robert (R-VA-5)
Committee(s) House - Financial Services
Status Died
Keywords McCarthy
© edegan.com, 2016

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

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

Link to bill page