Skip to main content

News & Updates

Hedge Fund Registration Legislation Introduced


February 1, 2009

Read Time

2 minutes


Last week, Senators Chuck Grassley and Carl Levin introduced new legislation that would bring all but the smallest hedge funds under the authority and oversight of the Securities and Exchange Commission.

Called the Hedge Fund Transparency Act, the bill would require hedge funds, private equity funds, and other pooled investment vehicles to register with the SEC and disclose certain information in order to avoid stricter regulation as “investment companies” under the Investment Company Act of 1940. Currently, most hedge funds avoid extensive regulatory burdens under the Investment Company Act – like those that apply to most mutual funds – by structuring themselves to fit one of the definitional exceptions found in the current law.

The new legislative proposal would modify these exceptions to require registration and significant additional public disclosure of the fund’s investors, affiliates, and ownership structure. The smallest hedge funds (those with assets under management of less than $50 million) would continue to be exempt from both the existing and the newly proposed requirements.

Specifically, funds seeking to avoid regulation as “investment companies” would be required to register with the SEC and comply with the following:

  • maintain books and records as required by the SEC
  • cooperate with the SEC’s requests for information or examination
  • file an annual disclosure report and
  • establish an anti-money laundering program and report suspicious transactions.

The annual disclosure report would contain, among other things:

  • the name and address of each beneficial owner (both natural persons and entities)
  • an explanation of the structure of ownership interests and
  • information regarding any affiliation with another financial institution.

As with any proposed legislation relating to hedge funds in the current environment, we expect Congress to give serious consideration to this bill, but it will be inevitably subject to various modifications and amendments in the legislative process that are difficult to predict at this early stage.

We do believe that the requirement for disclosing all beneficial owners of the fund will be very controversial and will meet strong resistance from fund managers and investors alike. But we also continue to believe that some form of additional hedge fund regulation is inevitable in the near future.

We will continue to monitor the progress of this proposed legislation and will keep you apprised of further developments.

Filed under: Corporate

June 22, 2022

Corporate Deal Activity Still Going Strong

Read More

June 15, 2022

What Sellers Should Watch for When Engaging with a Strategic Buyer

Read More