Research Handbooks in Financial Law series
Edited by Phoebus Athanassiou
Chapter 14: US Regulation of Investment Advisers and Private Investment Funds – A Concise Overview
Nathan Greene† and John Adams* 46 47 INTRODUCTION On 31 July 2010, President Obama enacted the single largest financial regulatory reform in the US since those of the Depression-era, in the 1930s and early 1940s. Considering the breadth of its scope, few, if any, financial market participants will not be affected in some way by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the ‘DoddFrank Act’ or the ‘Act’). While there is little in the way of additional regulation placed directly on private funds themselves, the Act increases the scope of the US Investment Advisers Act of 1940, as amended (the ‘Advisers Act’), by eliminating or tightening certain of its exemptions. These changes, which were clearly targeted at investment advisers to private funds, impose a universal registration of all larger hedge fund and private equity fund managers, at least those based in the United States (US). The Dodd-Frank Act also regulates the private investment fund industry in other ways. Notably: ● ● ● ● Derivatives, and especially over-the-counter (OTC) swap contracts, will be significantly more regulated and major users of swaps, including many private funds, will likewise be more regulated. The ‘Volcker Rule’ will limit the role that banks can play in sponsoring, managing or investing in hedge funds and private equity funds. There will be new systemic risk-related reporting by hedge funds and private equity funds. There is the potential, if still rather unlikely, that private funds or private fund managers could be regulated as systemically significant financial institutions. † * Partner,...
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