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United States · Bill · HR

H.R. 5424 (114th)

Investment Advisers Modernization Act of 2016

referredUnited States· United States Congress· EN

Introduced

9 June 2016

Last action

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Status

Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Sponsors

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Subjects

Discovery layer

Source updated

7 April 2025

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Summary

Investment Advisers Modernization Act of 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. A specified regulation regarding books and records that investment advisers must maintain shall be amended to declare that an investment adviser is not required to maintain: any communications or materials (including any made available in a secure electronic or physical data room) used in connection with due diligence for a prospective investment, if the communications or materials are subject to a confidentiality agreement; or any written communications regarding recommendations, advise, purchase or sell orders, or the receipt, disbursement or delivery of funds or securities if they are sent and received only by supervised persons of the investment adviser. 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. 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 accredited investors, qualified clients, qualified purchasers, or knowledgeable employees. Another regulation shall declare that an investment adviser is not required to deliver a brochure or brochure supplement to a client that is a limited partnership, limited liability company, or other pooled investment vehicle for which each limited partner, member, or other equity owner has received, before purchasing a security issued by the pooled investment vehicle, a prospectus, private placement memorandum, or other offering document containing (to the extent material to the private fund offering) substantially the same information as would be required by Part 2A or 2B of Form ADV. 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 current "privately offered securities" exemptions from this custody rule must apply to both certificated and uncertificated securities and exempt special purpose vehicles managed by private fund sponsors and co-investment funds that hold only one investment. 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. 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. This bill shall not apply to advisory services supplied to an investment company registered under the Investment Company Act of 1940.

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Documents

11 official files

Referred in Senate (text)

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