S 344 ISCommentsClose CommentsPermalink

To require hedge funds to register with the Securities and Exchange Commission, and for other purposes.CommentsClose CommentsPermalink

January 29, 2009CommentsClose CommentsPermalink

Mr. GRASSLEY (for himself and Mr. LEVIN) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban AffairsCommentsClose CommentsPermalink

To require hedge funds to register with the Securities and Exchange Commission, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Hedge Fund Transparency Act’.CommentsClose CommentsPermalink

SEC. 2. HEDGE FUND REGISTRATION REQUIREMENTS.

(a) Definition of Investment Company- Section 3(c) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)) is amended--CommentsClose CommentsPermalink





(1) by striking paragraph (1);CommentsClose CommentsPermalink





(2) by striking paragraph (7);CommentsClose CommentsPermalink





(3) by redesignating paragraphs (2) through (6) as paragraphs (1) through (5), respectively; andCommentsClose CommentsPermalink





(4) by redesignating paragraphs (8) through (14) as paragraphs (6) through (12), respectively.CommentsClose CommentsPermalink





(b) Additional Exemptions- Section 6 of the Investment Company Act of 1940 (15 U.S.C. 80a-6) is amended--CommentsClose CommentsPermalink





(1) in subsection (a), by adding at the end the following:CommentsClose CommentsPermalink





‘(6)(A) Subject to subsection (g), any issuer whose outstanding securities (other than short-term paper) are beneficially owned by not more than 100 persons, and which is not making and does not presently propose to make a public offering of its securities.CommentsClose CommentsPermalink





‘(B) For purposes of this paragraph and paragraph (7), beneficial ownership--CommentsClose CommentsPermalink





‘(i) by a company shall be deemed to be beneficial ownership by one person, except that, if the company owns 10 percent or more of the outstanding voting securities of the issuer, and is or, but for the exemption provided for in this paragraph or paragraph (7), would be an investment company, the beneficial ownership shall be deemed to be that of the holders of the outstanding securities (other than short-term paper) of such company; andCommentsClose CommentsPermalink





‘(ii) by any person who acquires securities or interests in securities of an issuer described in this paragraph shall be deemed to be beneficial ownership by the person from whom such transfer was made, pursuant to such rules and regulations as the Commission shall prescribe as necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this title, where the transfer was caused by legal separation, divorce, death, or any other involuntary event.CommentsClose CommentsPermalink





‘(7)(A) Subject to subsection (g), any issuer, the outstanding securities of which are owned exclusively by persons who, at the time of the acquisition of such securities, are qualified purchasers, and which is not making and does not at that time propose to make a public offering of such securities. Securities that are owned by persons who received the securities from a qualified purchaser as a gift or bequest, or in a case in which the transfer was caused by legal separation, divorce, death, or any other involuntary event, shall be deemed to be owned by a qualified purchaser, subject to such rules, regulations, and orders as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.CommentsClose CommentsPermalink





‘(B) Notwithstanding subparagraph (A), an issuer is exempt under this paragraph if--CommentsClose CommentsPermalink





‘(i) in addition to qualified purchasers, outstanding securities of that issuer are beneficially owned by not more than 100 persons who are not qualified purchasers, if--CommentsClose CommentsPermalink





‘(I) such persons acquired any portion of the securities of such issuer on or before September 1, 1996; andCommentsClose CommentsPermalink





‘(II) at the time at which such persons initially acquired the securities of such issuer, the issuer was exempt under paragraph (6); andCommentsClose CommentsPermalink





‘(ii) prior to availing itself of the exemption provided by this paragraph--CommentsClose CommentsPermalink





‘(I) such issuer has disclosed to each beneficial owner that future investors will be limited to qualified purchasers, and that ownership in such issuer is no longer limited to not more than 100 persons; andCommentsClose CommentsPermalink





‘(II) concurrently with or after such disclosure, such issuer has provided each beneficial owner with a reasonable opportunity to redeem any part or all of their interests in the issuer, notwithstanding any agreement to the contrary between the issuer and such persons, for the proportionate share of that person of the net assets of the issuer.CommentsClose CommentsPermalink





‘(C) Each person that elects to redeem under subparagraph (B)(ii)(II) shall receive an amount in cash equal to the proportionate share of that person of the net assets of the issuer, unless the issuer elects to provide such person with the option of receiving, and such person agrees to receive, all or a portion of the share of that person in assets of the issuer. If the issuer elects to provide such persons with such an opportunity, disclosure concerning such opportunity shall be made in the disclosure required by subparagraph (B)(ii)(I).CommentsClose CommentsPermalink





‘(D) An issuer that is exempt under this paragraph shall nonetheless be deemed to be an investment company for purposes of the limitations set forth in subparagraphs (A)(i) and (B)(i) of section 12(d)(1) (15 U.S.C. 80a-12(d)(1) (A)(i) and (B)(i)) relating to the purchase or other acquisition by such issuer of any security issued by any registered investment company and the sale of any security issued by any registered open-end investment company to any such issuer.CommentsClose CommentsPermalink





‘(E) For purposes of determining compliance with this paragraph and paragraph (6), an issuer that is otherwise exempt under this paragraph and an issuer that is otherwise exempt under paragraph (6) shall not be treated by the Commission as being a single issuer for purposes of determining whether the outstanding securities of the issuer exempt under paragraph (6) are beneficially owned by not more than 100 persons, or whether the outstanding securities of the issuer exempt under this paragraph are owned by persons that are not qualified purchasers. Nothing in this subparagraph shall be construed to establish that a person is a bona fide qualified purchaser for purposes of this paragraph or a bona fide beneficial owner for purposes of paragraph (6).’; andCommentsClose CommentsPermalink





(2) by adding at the end the following:CommentsClose CommentsPermalink





‘(g) Limitation on Exemptions for Large Investment Companies-CommentsClose CommentsPermalink





‘(1) IN GENERAL- An investment company with assets, or assets under management, of not less than $50,000,000 is exempt under subsection (a)(6) or (a)(7) only if that company--CommentsClose CommentsPermalink





‘(A) registers with the Commission;CommentsClose CommentsPermalink





‘(B) files an information form with the Commission under paragraph (2);CommentsClose CommentsPermalink





‘(C) maintains such books and records as the Commission may require; andCommentsClose CommentsPermalink





‘(D) cooperates with any request for information or examination by the Commission.CommentsClose CommentsPermalink





‘(2) INFORMATION FORM- The information form required under paragraph (1) shall be filed at such time and in such manner as the Commission shall require, and shall--CommentsClose CommentsPermalink





‘(A) be filed electronically;CommentsClose CommentsPermalink





‘(B) be filed not less frequently than once every 12 months;CommentsClose CommentsPermalink





‘(C) include--CommentsClose CommentsPermalink





‘(i) the name and current address of--CommentsClose CommentsPermalink





‘(I) each natural person who is a beneficial owner of the investment company;CommentsClose CommentsPermalink





‘(II) any company with an ownership interest in the investment company; andCommentsClose CommentsPermalink





‘(III) the primary accountant and primary broker used by the investment company;CommentsClose CommentsPermalink





‘(ii) an explanation of the structure of ownership interests in the investment company;CommentsClose CommentsPermalink





‘(iii) information on any affliation that the investment company has with another financial institution;CommentsClose CommentsPermalink





‘(iv) a statement of any minimum investment commitment required of a limited partner, member, or other investor;CommentsClose CommentsPermalink





‘(v) the total number of any limited partners, members, or other investors; andCommentsClose CommentsPermalink





‘(vi) the current value of--CommentsClose CommentsPermalink





‘(I) the assets of the investment company; andCommentsClose CommentsPermalink





‘(II) any assets under management by the investment company; andCommentsClose CommentsPermalink





‘(D) be made available by the Commission to the public at no cost and in an electronic, searchable format.’.CommentsClose CommentsPermalink

SEC. 3. IMPLEMENTING GUIDANCE AND RULES.

(a) Forms and Guidance- Not later than 180 days after the date of enactment of this Act, the Securities and Exchange Commission shall issue such forms and guidance as are necessary to carry out this Act.CommentsClose CommentsPermalink





(b) Rules- The Securities and Exchange Commission may make a rule to carry out this Act.CommentsClose CommentsPermalink

SEC. 4. ANTI-MONEY LAUNDERING OBLIGATIONS.

(a) Purpose- It is the purpose of this section to safeguard against the financing of terrorist organizations and money laundering.CommentsClose CommentsPermalink





(b) In General- An investment company that relies on paragraph (6) or (7) of section 6(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-6(a) (6) and (7)), as amended by this Act, as the basis for an exemption under that Act shall establish an anti-money laundering program and shall report suspicious transactions under subsections (g) and (h) of section 5318 of title 31, United States Code.CommentsClose CommentsPermalink





(c) Rulemaking-CommentsClose CommentsPermalink





(1) IN GENERAL- The Secretary of the Treasury, in consultation with the Chairman of the Securities and Exchange Commission and the Chairman of the Commodity Futures Trading Commission, shall, by rule, establish the policies, procedures, and controls necessary to carry out subsection (b).CommentsClose CommentsPermalink





(2) CONTENTS- The rule required by paragraph (1)--CommentsClose CommentsPermalink





(A) shall require that each investment company that receives an exemption under paragraph (6) or (7) of section 6(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-6(a) (6) and (7)), as amended by this Act, shall--CommentsClose CommentsPermalink





(i) use risk-based due diligence policies, procedures, and controls that are reasonably designed to ascertain the indentity of and evaluate any foreign person (including, where appropriate, the nominal and beneficial owner or beneficiary of a foreign corporation, partnership, trust, or other foreign entity) that supplies or plans to supply funds to be invested with the advice or assistance of such investment company; andCommentsClose CommentsPermalink





(ii) be subject to section 5318(k)(2) of title 31, United States Code; andCommentsClose CommentsPermalink





(B) may incorporate elements of the proposed rule for unregistered investment companies published in the Federal Register on September 26, 2002 (67 Fed. Reg. 60617) (relating to anti-money laundering programs).CommentsClose CommentsPermalink





(3) PUBLICATION DATE- The Secretary of the Treasury, shall--CommentsClose CommentsPermalink





(A) propose the rule required by this subsection not later than 90 days after the date of enactment of this Act; andCommentsClose CommentsPermalink





(B) issue the rule required by this subsection in final form not later than 180 days after the date of enactment of this Act.CommentsClose CommentsPermalink





(d) Effective Date- Subsection (b) shall take effect 1 year after the date of enactment of this Act, whether or not a final rule is issued under subsection (c), and the failure to issue such rule shall in no way affect the enforceability of this section.CommentsClose CommentsPermalink

SEC. 5. TECHNICAL CORRECTIONS.

(a) Securities Act of 1933- Section 3(a) of the Securities Act of 1933 (15 U.S.C. 77c(a)) is amended--CommentsClose CommentsPermalink





(1) in paragraph (2)--CommentsClose CommentsPermalink





(A) by striking ‘section 3(c)(3)’ and inserting ‘section 3(c)(2)’; andCommentsClose CommentsPermalink





(B) by striking ‘section 3(c)(14)’ and inserting ‘section 3(c)(12)’;CommentsClose CommentsPermalink





(2) in paragraph (4), by striking ‘section 3(c)(10)(B)’ and inserting ‘section 3(c)(8)(B)’; andCommentsClose CommentsPermalink





(3) in paragraph (13), by striking ‘section (3)(c)(14)’ and inserting ‘section 3(c)(12)’.CommentsClose CommentsPermalink





(b) Securities Exchange Act of 1934- The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended--CommentsClose CommentsPermalink





(1) in section 3(a) (15 U.S.C. 78c(a))--CommentsClose CommentsPermalink





(A) in paragraph (12)(A)--CommentsClose CommentsPermalink





(i) in clause (iii), by striking ‘section 3(c)(3)’ and inserting ‘section 3(c)(2)’;CommentsClose CommentsPermalink





(ii) in clause (v), by striking ‘section 3(c)(10)(B)’ and inserting ‘section 3(c)(8)(B)’; andCommentsClose CommentsPermalink





(iii) in clause (vi), by striking ‘section 3(c)(14)’ and inserting ‘section 3(c)(12)’;CommentsClose CommentsPermalink





(B) in paragraph (12)(C), by striking ‘section 3(c)(14)’ and inserting ‘section 3(c)(12)’; andCommentsClose CommentsPermalink





(C) in paragraph (54)(A)--CommentsClose CommentsPermalink





(i) in clause (ii), by striking ‘exclusion from the definition of investment company pursuant to section 3(c)(7)’ and inserting ‘exemption under section 6(a)(7)’; andCommentsClose CommentsPermalink





(ii) in clause (vii), by striking ‘section 3(c)(2)’ and inserting ‘section 3(c)(1)’;CommentsClose CommentsPermalink





(2) in section 3(g) (15 U.S.C. 78c(g)) by striking ‘section 3(c)(14)’ each place that term appears and inserting ‘section 3(c)(12)’; andCommentsClose CommentsPermalink





(3) in section 12(g)(2) (15 U.S.C. 78l(g)(2))--CommentsClose CommentsPermalink





(A) in subparagraph (D), by striking ‘section 3(c)(10)(B)’ and inserting ‘section 3(c)(8)(B)’; andCommentsClose CommentsPermalink





(B) in subparagraph (H), by striking ‘section 3(c)(14)’ and inserting ‘section 3(c)(12)’.CommentsClose CommentsPermalink





(c) Investment Company Act of 1940- The Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is amended--CommentsClose CommentsPermalink





(1) in section 2(a)(51) (15 U.S.C. 80a-2(a)(51))--CommentsClose CommentsPermalink





(A) in subparagraph (A)(i), by striking ‘excepted under section 3(c)(7)’ and inserting ‘exempt under section 6(a)(7)’; andCommentsClose CommentsPermalink





(B) in subparagraph (C)--CommentsClose CommentsPermalink





(i) by striking ‘that, but for the exceptions provided for in paragraph (1) or (7) of section 3(c), would be an investment company (hereafter in this paragraph referred to as an ‘excepted investment company’)’ and inserting ‘that is exempt under paragraph (6) or (7) of section 6(a) (hereafter in this paragraph referred to as an ‘exempt investment company’)’;CommentsClose CommentsPermalink





(ii) by striking ‘section 3(c)(1)(A)’ and inserting ‘section 6(a)(6)(B)(i)’; andCommentsClose CommentsPermalink





(iii) by striking ‘excepted’ each place that term appears and inserting ‘any exempt’;CommentsClose CommentsPermalink





(2) in section 6 (15 U.S.C. 80a-6)--CommentsClose CommentsPermalink





(A) in subsection (a)--CommentsClose CommentsPermalink





(i) in paragraph (2), by striking ‘section 3(c)(1)’ and inserting ‘section 6(a)(6)’; andCommentsClose CommentsPermalink





(ii) in paragraph (5)(A)(iv), by striking ‘that would be an investment company except for the exclusions from the definition of the term ‘investment company’ under paragraph (1) or (7) of section 3(c)’ and inserting ‘that is exempt under paragraph (6) or (7) of section 6(a)’; andCommentsClose CommentsPermalink





(B) in subsection (f), by striking ‘excluded from the definition of an investment company by section 3(c)(1)’ and inserting ‘exempt under section 6(a)(6)’;CommentsClose CommentsPermalink





(3) in section 7(e) (15 U.S.C. 80a-7(e)), by striking ‘section 3(c)(10)(B)’ and inserting ‘section 3(c)(8)(B)’; andCommentsClose CommentsPermalink





(4) in section 30 (15 U.S.C. 80a-29) in each of subsections (i) and (j), by striking ‘section 3(c)(14)’ each place that term appears and inserting ‘section 3(c)(12)’.CommentsClose CommentsPermalink





(d) Investment Advisers Act of 1940- The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is amended--CommentsClose CommentsPermalink





(1) in section 203(b) (15 U.S.C. 80b-3(b))--CommentsClose CommentsPermalink





(A) in paragraph (4) by striking ‘section 3(c)(10)’ each place that term appears and inserting ‘section 3(c)(8)’; andCommentsClose CommentsPermalink





(B) in paragraph (5), by striking ‘section 3(c)(14)’ and inserting ‘section 3(c)(12)’; andCommentsClose CommentsPermalink





(2) in section 205(b) (15 U.S.C. 80b-5(b))--CommentsClose CommentsPermalink





(A) in paragraph (2)(B), by striking ‘section 3(c)(11)’ and inserting ‘section 3(c)(9)’; andCommentsClose CommentsPermalink





(B) in paragraph (4), by striking ‘excepted from the definition of an investment company under section 3(c)(7)’ and inserting ‘exempt under section 6(a)(7)’.CommentsClose CommentsPermalink





(e) Internal Revenue Code of 1986- Section 851(a)(2) of the Internal Revenue Code of 1986 (relating to the definition of regulated investment company) is amended by striking ‘section 3(c)(3)’ and inserting ‘section 3(c)(2)’.CommentsClose CommentsPermalink