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House set for vote on SEC registration

The US House of Representatives will vote next week on legislation that would require private fund managers with assets over $150 million to register with the Securities and Exchange Commission. If approved the bill will then go on to the Senate.

The US House Financial Services Committee will vote next week on a reform package that, if passed, would require almost all private fund managers to register as investment advisers with the Securities and Exchange Commission. It would also give the SEC the power to decide what information private fund managers must disclose in order to help regulators evaluate their “systemic risk”.

The registration requirement is just one of nine pieces of the Wall Street Reform and Consumer Protection Act (HR 4173), a set of reforms intended to address systemic risks that lead to last year’s financial meltdown. Other aspects of the reform package up for vote next week include the strengthening of the SEC’s powers and giving shareholders an advisory vote on pay practices such as executive compensation and golden parachutes.

While the legislation would impact almost all hedge fund and private equity funds, venture capital firms and small business investment companies (SBIC) are exempted as part of a carve-out approved in October.


Also included in the package is the Investor Protection Act of 2009, which includes a provision that would give state regulators jurisdiction over fund managers with less than $100 million in assets under management. Previously, that threshold was set at $25 million.

Even if the package is approved it still must be reconciled with similar legislation in the Senate, where the Senate Banking Committee last month released a draft bill that that would require only hedge funds – and not private equity or venture funds – to register with the SEC. Private equity and venture capital funds would still be subject to some reporting requirements, but the bill leaves the SEC to decide what those will be, within six months of the passage of any final legislation.

While it is unknown which version will be favored in any final piece of legislation, Craig Miller, a partner at Manatt, Phelps & Phillips, recently said the fact that the SEC could be stretched beyond its capabilities may favor a smaller regulatory web. The Senate has not yet set a date for a vote over its legislation.