Senator introduces registration bill

Proposed legislation sponsored by an influential US senator would require SEC registration of all investment advisors, including apparently all hedge fund and private equity fund managers, with more than $50 million in assets.

US Senator Chuck Grassley, a Republican from Iowa and ranking member of the Senate Finance Committee, today introduced the Hedge Fund Registration Act, proposed legislation that would require many private investment advisors to register with the Securities and Exchange Commission.

Grassley has already attempted to pass such legislation, but the proposal failed to draw enough support.

In a press release, Grassley focuses on what he calls the non-transparency of the hedge fund industry. The release and the two-page draft of the bill do not mention private equity funds, or give any definition of what a hedge fund is.

But the bill would require SEC registration of all investment advisors except those that meet all four of the following criteria: managing less than $50 million; having fewer than 15 clients; not “holding himself out to the public as an investment advisor”; and managing assets on behalf of fewer than fifteen investors.

Grassley argues in the press release that “pension holders are in the dark about their exposure to hedge fund losses because transparency is so inadequate”.

“[T]his legislation didn’t have many friends the last time I introduced it as an amendment,” said Grassley in a statement. “These funds don’t want people to know what they do and have fought hard to keep it that way. Well, I think that’s all the more reason to shed some sunlight on them to see what they’re up to.”

Tomorrow, the finance committee of the US House of Representatives will hold a hearing entitled “Private Equity’s Effect on Workers and Firms”.

Grassley is reportedly also behind recent inquiries into the tax rate applied to GP carried interest.