Private Fund Transparency Act

We have another bill that is proposing to regulate private pools of capital. Yesterday, Senator Jack Reed (RI) introduced the Private Fund Transparency Act of 2009 (S.1276)

According to the press release, the Private Fund Transparency Act of 2009 will:

  • Require all hedge fund and other investment pool advisers that manage more than $30 million in assets to register as investment advisers with the SEC. The remaining smaller funds will continue to fall under state oversight.
  • Provide the SEC with the authority to collect information from the hedge fund industry and other investment pools, including the risks they may pose to the financial system.
  • Authorize the SEC to require hedge funds and other investment pools to maintain and share with other federal agencies any information necessary for the calculation of systemic risk.
  • Clarify other aspects of SEC’s authority in order to strengthen its ability to oversee registered investment advisers.

The text of bill has not been released yet. I am not sure it matters given that there are already two other similar bills: Hedge Fund Adviser Registration Act of 2009 and the Hedge Fund Transparency Act of 2009. On top of that, the Obama administration is finalizing their proposed plan for changing the regulatory framework of the financial industry.

I  found Senator Reed’s reasoning on the need for his proposed law to be an interesting perspective:

“Private funds are not currently subject to the same set of standards and regulations as banks and mutual funds, reflecting the traditional view that their investors are more sophisticated and therefore require less protection. This has enabled private funds to operate largely outside the framework of the financial regulatory system even as they have become increasingly interwoven with the rest of the country’s financial markets. As a result, there is no data on the number and nature of these firms or ability to calculate the risks they pose to America’s broader economy.”

Press Release from Senator Reed on the Private Fund Transparency Act