  title iv regulation of advisers to hedge funds and others  sec 401 short title  this title may be cited as the private fund investment advisers registration act of 2010    sec 402 definitions  a investment advisers act of 1940 definitions section 202 a of the investment advisers act of 1940 15 usc 80b2 a is amended by adding at the end the following  29 the term private fund means an issuer that would be an investment company, as defined in section 3 of the investment company act of 1940 15 usc 80a3 , but for section 3 c 1 or 3 c 7 of that act   30 the term foreign private adviser means any investment adviser who  a has no place of business in the united states   b has, in total, fewer than 15 clients and investors in the united states in private funds advised by the investment adviser   c has aggregate assets under management attributable to clients in the united states and investors in the united states in private funds advised by the investment adviser of less than $25,000,000, or such higher amount as the commission may, by rule, deem appropriate in accordance with the purposes of this title and   d neither  i holds itself out generally to the public in the united states as an investment adviser nor   ii acts as  i an investment adviser to any investment company registered under the investment company act of 1940 or   ii a company that has elected to be a business development company pursuant to section 54 of the investment company act of 1940 15 usc 80a53 , and has not withdrawn its election        b other definitions as used in this title, the terms investment adviser and private fund have the same meanings as in section 202 of the investment advisers act of 1940, as amended by this title    sec 403 elimination of private adviser exemption limited exemption for foreign private advisers limited intrastate exemption  section 203 b of the investment advisers act of 1940 15 usc 80b3 b is amended  1 in paragraph 1 , by inserting , other than an investment adviser who acts as an investment adviser to any private fund, before all of whose   2 by striking paragraph 3 and inserting the following  3 any investment adviser that is a foreign private adviser   and   3 in paragraph 5 , by striking or at the end   4 in paragraph 6  a by striking any investment adviser and inserting a any investment adviser   b by redesignating subparagraphs a and b as clauses i and ii , respectively and   c in clause ii as so redesignated , by striking the period at the end and inserting or and   d by adding at the end the following  b any investment adviser that is registered with the commodity futures trading commission as a commodity trading advisor and advises a private fund, provided that, if after the date of enactment of the private fund investment advisers registration act of 2010, the business of the advisor should become predominately the provision of securities-related advice, then such adviser shall register with the commission      5 by adding at the end the following  7 any investment adviser, other than any entity that has elected to be regulated or is regulated as a business development company pursuant to section 54 of the investment company act of 1940 15 usc 80a54 , who solely advises  a small business investment companies that are licensees under the small business investment act of 1958   b entities that have received from the small business administration notice to proceed to qualify for a license as a small business investment company under the small business investment act of 1958, which notice or license has not been revoked or   c applicants that are affiliated with 1 or more licensed small business investment companies described in subparagraph a and that have applied for another license under the small business investment act of 1958, which application remains pending        sec 404 collection of systemic risk data reports examinations disclosures  section 204 of the investment advisers act of 1940 15 usc 80b4 is amended  1 by redesignating subsections b and c as subsections c and d , respectively and   2 by inserting after subsection a the following  b records and reports of private funds  1 in general the commission may require any investment adviser registered under this title  a to maintain such records of, and file with the commission such reports regarding, private funds advised by the investment adviser, as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk by the financial stability oversight council in this subsection referred to as the council and   b to provide or make available to the council those reports or records or the information contained therein    2 treatment of records the records and reports of any private fund to which an investment adviser registered under this title provides investment advice shall be deemed to be the records and reports of the investment adviser   3 required information the records and reports required to be maintained by an investment adviser and subject to inspection by the commission under this subsection shall include, for each private fund advised by the investment adviser, a description of  a the amount of assets under management and use of leverage, including off-balance-sheet leverage   b counterparty credit risk exposure   c trading and investment positions   d valuation policies and practices of the fund   e types of assets held   f side arrangements or side letters, whereby certain investors in a fund obtain more favorable rights or entitlements than other investors   g trading practices and   h such other information as the commission, in consultation with the council, determines is necessary and appropriate in the public interest and for the protection of investors or for the assessment of systemic risk, which may include the establishment of different reporting requirements for different classes of fund advisers, based on the type or size of private fund being advised    4 maintenance of records an investment adviser registered under this title shall maintain such records of private funds advised by the investment adviser for such period or periods as the commission, by rule, may prescribe as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk   5 filing of records the commission shall issue rules requiring each investment adviser to a private fund to file reports containing such information as the commission deems necessary and appropriate in the public interest and for the protection of investors or for the assessment of systemic risk   6 examination of records  a periodic and special examinations the commission  i shall conduct periodic inspections of the records of private funds maintained by an investment adviser registered under this title in accordance with a schedule established by the commission and   ii may conduct at any time and from time to time such additional, special, and other examinations as the commission may prescribe as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk    b availability of records an investment adviser registered under this title shall make available to the commission any copies or extracts from such records as may be prepared without undue effort, expense, or delay, as the commission or its representatives may reasonably request    7 information sharing  a in general the commission shall make available to the council copies of all reports, documents, records, and information filed with or provided to the commission by an investment adviser under this subsection as the council may consider necessary for the purpose of assessing the systemic risk posed by a private fund   b confidentiality the council shall maintain the confidentiality of information received under this paragraph in all such reports, documents, records, and information, in a manner consistent with the level of confidentiality established for the commission pursuant to paragraph 8 the council shall be exempt from section 552 of title 5, united states code, with respect to any information in any report, document, record, or information made available, to the council under this subsection    8 commission confidentiality of reports notwithstanding any other provision of law, the commission may not be compelled to disclose any report or information contained therein required to be filed with the commission under this subsection, except that nothing in this subsection authorizes the commission  a to withhold information from congress, upon an agreement of confidentiality or   b prevent the commission from complying with  i a request for information from any other federal department or agency or any self-regulatory organization requesting the report or information for purposes within the scope of its jurisdiction or   ii an order of a court of the united states in an action brought by the united states or the commission     9 other recipients confidentiality any department, agency, or self-regulatory organization that receives reports or information from the commission under this subsection shall maintain the confidentiality of such reports, documents, records, and information in a manner consistent with the level of confidentiality established for the commission under paragraph 8   10 public information exception  a in general the commission, the council, and any other department, agency, or self-regulatory organization that receives information, reports, documents, records, or information from the commission under this subsection, shall be exempt from the provisions of section 552 of title 5, united states code, with respect to any such report, document, record, or information any proprietary information of an investment adviser ascertained by the commission from any report required to be filed with the commission pursuant to this subsection shall be subject to the same limitations on public disclosure as any facts ascertained during an examination, as provided by section 210 b of this title   b proprietary information for purposes of this paragraph, proprietary information includes sensitive, non-public information regarding  i the investment or trading strategies of the investment adviser   ii analytical or research methodologies   iii trading data   iv computer hardware or software containing intellectual property and   v any additional information that the commission determines to be proprietary     11 annual report to congress the commission shall report annually to congress on how the commission has used the data collected pursuant to this subsection to monitor the markets for the protection of investors and the integrity of the markets        sec 405 disclosure provision amendment  section 210 c of the investment advisers act of 1940 15 usc 80b10 c is amended by inserting before the period at the end the following or for purposes of assessment of potential systemic risk    sec 406 clarification of rulemaking authority  section 211 of the investment advisers act of 1940 15 usc 80b11 is amended  1 in subsection a , by inserting before the period at the end of the first sentence the following , including rules and regulations defining technical, trade, and other terms used in this title, except that the commission may not define the term and client for purposes of paragraphs 1 and 2 of section 206 to include an investor in a private fund managed by an investment adviser, if such private fund has entered into an advisory contract with such adviser   2 by adding at the end the following  e disclosure rules on private funds the commission and the commodity futures trading commission shall, after consultation with the council but not later than 12 months after the date of enactment of the private fund investment advisers registration act of 2010, jointly promulgate rules to establish the form and content of the reports required to be filed with the commission under subsection 204 b and with the commodity futures trading commission by investment advisers that are registered both under this title and the commodity exchange act 7 usc 1a et seq       sec 407 exemption of and reporting by venture capital fund advisers  section 203 of the investment advisers act of 1940 15 usc 80b3 is amended by adding at the end the following  l exemption of venture capital fund advisers no investment adviser that acts as an investment adviser solely to 1 or more venture capital funds shall be subject to the registration requirements of this title with respect to the provision of investment advice relating to a venture capital fund not later than 1 year after the date of enactment of this subsection, the commission shall issue final rules to define the term venture capital fund for purposes of this subsection the commission shall require such advisers to maintain such records and provide to the commission such annual or other reports as the commission determines necessary or appropriate in the public interest or for the protection of investors      sec 408 exemption of and reporting by certain private fund advisers  section 203 of the investment advisers act of 1940 15 usc 80b3 is amended by adding at the end the following  m exemption of and reporting by certain private fund advisers  1 in general the commission shall provide an exemption from the registration requirements under this section to any investment adviser of private funds, if each of such investment adviser acts solely as an adviser to private funds and has assets under management in the united states of less than $150,000,000   2 reporting the commission shall require investment advisers exempted by reason of this subsection to maintain such records and provide to the commission such annual or other reports as the commission determines necessary or appropriate in the public interest or for the protection of investors    n registration and examination of mid-sized private fund advisers in prescribing regulations to carry out the requirements of this section with respect to investment advisers acting as investment advisers to mid-sized private funds, the commission shall take into account the size, governance, and investment strategy of such funds to determine whether they pose systemic risk, and shall provide for registration and examination procedures with respect to the investment advisers of such funds which reflect the level of systemic risk posed by such funds      sec 409 family offices  a in general section 202 a 11 of the investment advisers act of 1940 15 usc 80b2 a 11 is amended by striking or g and inserting the following g any family office, as defined by rule, regulation, or order of the commission, in accordance with the purposes of this title or h   b rulemaking the rules, regulations, or orders issued by the commission pursuant to section 202 a 11 g of the investment advisers act of 1940, as added by this section, regarding the definition of the term family office shall provide for an exemption that  1 is consistent with the previous exemptive policy of the commission, as reflected in exemptive orders for family offices in effect on the date of enactment of this act, and the grandfathering provisions in paragraph 3   2 recognizes the range of organizational, management, and employment structures and arrangements employed by family offices and   3 does not exclude any person who was not registered or required to be registered under the investment advisers act of 1940 on january 1, 2010 from the definition of the term family office , solely because such person provides investment advice to, and was engaged before january 1, 2010 in providing investment advice to  a natural persons who, at the time of their applicable investment, are officers, directors, or employees of the family office who  i have invested with the family office before january 1, 2010 and   ii are accredited investors, as defined in regulation d of the commission or any successor thereto under the securities act of 1933, or, as the commission may prescribe by rule, the successors-in-interest thereto    b any company owned exclusively and controlled by members of the family of the family office, or as the commission may prescribe by rule   c any investment adviser registered under the investment adviser act of 1940 that provides investment advice to the family office and who identifies investment opportunities to the family office, and invests in such transactions on substantially the same terms as the family office invests, but does not invest in other funds advised by the family office, and whose assets as to which the family office directly or indirectly provides investment advice represent, in the aggregate, not more than 5 percent of the value of the total assets as to which the family office provides investment advice     c antifraud authority a family office that would not be a family office, but for subsection b 3 , shall be deemed to be an investment adviser for the purposes of paragraphs 1 , 2 and 4 of section 206 of the investment advisers act of 1940    sec 410 state and federal responsibilities asset threshold for federal registration of investment advisers  section 203a a of the of the investment advisers act of 1940 15 usc 80b3a a is amended  1 by redesignating paragraph 2 as paragraph 3 and   2 by inserting after paragraph 1 the following  2 treatment of mid-sized investment advisers  a in general no investment adviser described in subparagraph b shall register under section 203, unless the investment adviser is an adviser to an investment company registered under the investment company act of 1940, or a company which has elected to be a business development company pursuant to section 54 of the investment company act of 1940, and has not withdrawn the election, except that, if by effect of this paragraph an investment adviser would be required to register with 15 or more states, then the adviser may register under section 203   b covered persons an investment adviser described in this subparagraph is an investment adviser that  i is required to be registered as an investment adviser with the securities commissioner or any agency or office performing like functions of the state in which it maintains its principal office and place of business and, if registered, would be subject to examination as an investment adviser by any such commissioner, agency, or office and   ii has assets under management between  i the amount specified under subparagraph a of paragraph 1 , as such amount may have been adjusted by the commission pursuant to that subparagraph and   ii $100,000,000, or such higher amount as the commission may, by rule, deem appropriate in accordance with the purposes of this title          sec 411 custody of client assets  the investment advisers act of 1940 15 usc 80b1 et seq is amended by adding at the end the following new section  sec 223 custody of client accounts  an investment adviser registered under this title shall take such steps to safeguard client assets over which such adviser has custody, including, without limitation, verification of such assets by an independent public accountant, as the commission may, by rule, prescribe       sec 412 comptroller general study on custody rule costs  the comptroller general of the united states shall  1 conduct a study of  a the compliance costs associated with the current securities and exchange commission rules 2042 17 cfr parts 2752042 and rule 206 4 2 17 cfr 275206 4 2 under the investment advisers act of 1940 regarding custody of funds or securities of clients by investment advisers and   b the additional costs if subsection b 6 of rule 206 4 2 17 cfr 275206 4 2 b 6 relating to operational independence were eliminated and    2 submit a report to the committee on banking, housing, and urban affairs of the senate and the committee on financial services of the house of representatives on the results of such study, not later than 3 years after the date of enactment of this act     sec 413 adjusting the accredited investor standard  a in general the commission shall adjust any net worth standard for an accredited investor, as set forth in the rules of the commission under the securities act of 1933, so that the individual net worth of any natural person, or joint net worth with the spouse of that person, at the time of purchase, is more than $1,000,000 as such amount is adjusted periodically by rule of the commission , excluding the value of the primary residence of such natural person, except that during the 4-year period that begins on the date of enactment of this act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of such natural person   b review and adjustment  1 initial review and adjustment  a initial review the commission may undertake a review of the definition of the term accredited investor , as such term applies to natural persons, to determine whether the requirements of the definition, excluding the requirement relating to the net worth standard described in subsection a , should be adjusted or modified for the protection of investors, in the public interest, and in light of the economy   b adjustment or modification upon completion of a review under subparagraph a , the commission may, by notice and comment rulemaking, make such adjustments to the definition of the term accredited investor , excluding adjusting or modifying the requirement relating to the net worth standard described in subsection a , as such term applies to natural persons, as the commission may deem appropriate for the protection of investors, in the public interest, and in light of the economy    2 subsequent reviews and adjustment  a subsequent reviews not earlier than 4 years after the date of enactment of this act, and not less frequently than once every 4 years thereafter, the commission shall undertake a review of the definition, in its entirety, of the term accredited investor , as defined in section 230215 of title 17, code of federal regulations, or any successor thereto, as such term applies to natural persons, to determine whether the requirements of the definition should be adjusted or modified for the protection of investors, in the public interest, and in light of the economy   b adjustment or modification upon completion of a review under subparagraph a , the commission may, by notice and comment rulemaking, make such adjustments to the definition of the term accredited investor , as defined in section 230215 of title 17, code of federal regulations, or any successor thereto, as such term applies to natural persons, as the commission may deem appropriate for the protection of investors, in the public interest, and in light of the economy      sec 414 rule of construction relating to the commodities exchange act  the investment advisers act of 1940 15 usc 80b1 et seq is further amended by adding at the end the following new section  sec 224 rule of construction relating to the commodities exchange act  nothing in this title shall relieve any person of any obligation or duty, or affect the availability of any right or remedy available to the commodity futures trading commission or any private party, arising under the commodity exchange act 7 usc 1 et seq governing commodity pools, commodity pool operators, or commodity trading advisors       sec 415 gao study and report on accredited investors  the comptroller general of the united states shall conduct a study on the appropriate criteria for determining the financial thresholds or other criteria needed to qualify for accredited investor status and eligibility to invest in private funds, and shall submit a report to the committee on banking, housing, and urban affairs of the senate and the committee on financial services of the house of representatives on the results of such study not later than 3 years after the date of enactment of this act    sec 416 gao study on self-regulatory organization for private funds  the comptroller general of the united states shall  1 conduct a study of the feasibility of forming a self-regulatory organization to oversee private funds and   2 submit a report to the committee on banking, housing, and urban affairs of the senate and the committee on financial services of the house of representatives on the results of such study, not later than 1 year after the date of enactment of this act     sec 417 commission study and report on short selling  a studies the division of risk, strategy, and financial innovation of the commission shall conduct  1 a study, taking into account current scholarship, on the state of short selling on national securities exchanges and in the over-the-counter markets, with particular attention to the impact of recent rule changes and the incidence of  a the failure to deliver shares sold short or   b delivery of shares on the fourth day following the short sale transaction and    2 a study of  a the feasibility, benefits, and costs of requiring reporting publicly, in real time short sale positions of publicly listed securities, or, in the alternative, reporting such short positions in real time only to the commission and the financial industry regulatory authority and   b the feasibility, benefits, and costs of conducting a voluntary pilot program in which public companies will agree to have all trades of their shares marked short , market maker short , buy , buy-to-cover , or long , and reported in real time through the consolidated tape     b reports the commission shall submit a report to the committee on banking, housing, and urban affairs of the senate and the committee on financial services of the house of representatives  1 on the results of the study required under subsection a 1 , including recommendations for market improvements, not later than 2 years after the date of enactment of this act and   2 on the results of the study required under subsection a 2 , not later than 1 year after the date of enactment of this act     sec 418 qualified client standard  section 205 e of the investment advisers act of 1940 15 usc 80b5 e is amended by adding at the end the following with respect to any factor used in any rule or regulation by the commission in making a determination under this subsection, if the commission uses a dollar amount test in connection with such factor, such as a net asset threshold, the commission shall, by order, not later than 1 year after the date of enactment of the private fund investment advisers registration act of 2010, and every 5 years thereafter, adjust for the effects of inflation on such test any such adjustment that is not a multiple of $100,000 shall be rounded to the nearest multiple of $100,000    sec 419 transition period  except as otherwise provided in this title, this title and the amendments made by this title shall become effective 1 year after the date of enactment of this act, except that any investment adviser may, at the discretion of the investment adviser, register with the commission under the investment advisers act of 1940 during that 1-year period, subject to the rules of the commission    