Tag: Mike Capuano

Pension Security Act of 2009 and its Effect on Private Investment Funds

department-of-labor

I missed the introduction of the Pension Security Act. Rep Michael Castle introduced the bills in January and it was referred to the Committee on Education and Labor. It’s a short bill, but would have a big effect on the disclosure of investments in private investment funds.

The bill revises a section of the Employee Retirement Income Security Act (ERISA) and require of disclosure of which hedge funds the defined benefit pension plan has invested and the dollar amount of the investment.

The bill had a broad definition of “hedge fund”:

means an unregistered investment pool permitted under sections 3(c)(1) and 3(c)(7) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1), (7)) and section 4(2) of the Securities Act of 1933 (15 U.S.C. 77d(2)) and Rule 506 of Regulation D of the Securities and Exchange Commission (17 CFR 230.506).

The bill would require defined benefit pension plans on their annual financial statement to identify on a separate schedule, each “hedge fund in which amounts held for investment under the plan are invested as of the end of the plan year covered by the annual report and the amount so invested in such hedge fund.”

The Secretary of Labor,  in consultation with the Securities and Exchange Commission, would be charged with issuing initial regulations within one year.

References:

Hedge Fund Adviser Registration Act of 2009

capuanoCongressmen Mike Capuano of Massachusetts and Mike Castle of Delaware introduced the Hedge Fund Adviser Registration Act of 2009 (H.R. 711). The Act, if passed, would delete Section 203(b)(3) from the Investment Advisers Act of 1940.

This section of the Investment Advisers Act exempts from registration an investment adviser who has fewer than 15 clients and does not hold themselves out to the public as an investment adviser. The general partner of a private investment fund is generally considered an investment adviser to that fund. Many private investment funds use this exemption if they have less than 15 funds.

Since the bill was just proposed on January 27, 2009 it is too early to speculate as to whether it will be passed.

This act falls into the bucket with the Hedge Fund Transparency Act of 2009 as one of several prospective changes to the private investment fund industry.