July 28, 2010 - Now that President Obama passed The Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC must undertake a number of rulemaking initiatives and studies. So, on Tuesday the regulator invited the public to submit comments on a wide variety of areas.

The SEC is seeking the public’s views even before official comment periods are opened. It plans to post all submissions on its Website. Among them are a handful of provisions that impact hedge funds, private equity funds and other private partnerships.

They include:

Systemic Risk Reporting.
Law firm King & Spaulding points out that the SEC must make available to the Financial Stability Oversight Council all information regarding private funds filed with or provided to the SEC as the Financial Stability Oversight Council determines necessary to assess systemic risk.

Exemptions for Certain Advisers.
The Bill has an exemption from registration for advisers to “venture capital funds.” However, the law firm points out that an earlier version of the Senate bill provided a separate exemption for “private equity funds.” So, it says there is some debate over whether “venture capital fund” will be defined to include traditional private equity funds or other funds, such as mezzanine funds, in addition to venture capital funds. In addition, real estate private equity funds that are eligible for certain exceptions from registration under the Investment Company Act may not be “private funds” within the definition contained in the Reform Bill, the law firm adds.

Family Offices Exclusion.
The bill provides an exception to the definition of “investment adviser” in the Advisers Act for any family office when it comes to registration. “The Reform Bill does not define this term and provides instead that the rules, regulations or orders issued by the SEC will define this term and provide for an exemption that is consistent with the previous exemptive policy of the Commission, as reflected in exemptive orders for family offices currently in effect and recognizes the range of organizational, management, and employment structures employed by family offices,” King & Spaulding states. However, there is a grandfather clause for certain investment advisers to family offices who were not required to register as of January 1. New Threshold for Federal Registration. Advisers to “private funds” must register if they have at least $150 million under management.

Accredited Investor Standard.
As I reported earlier this month, the accredited investor net worth threshold for natural persons remains at $1 million. However, it no longer includes the value of the investor’s primary residence. The bill does not change the annual income test, however. The current requirement is $200,000 of income for an individual, or $300,000 for a couple, in each of the two most recent years, and are reasonably expected to earn at least the same in the current year.