U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

Speech by SEC Commissioner:
Opening Statement at SEC Open Meeting: (1) Rules Implementing Amendments to the Advisers Act of 1940 (Final Rules); (2) Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers With Less Than $150 Million in Assets Under Management, and Foreign Private Advisers (Final Rules)


Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

Washington, D.C.
June 22, 2011

I would like to thank the staff of the Division of Investment Management, and the other divisions and offices who have worked on the recommendations before us this morning. I know that your names have been mentioned already, but I wanted to make sure to echo the appreciation expressed by my colleagues. I would also like to welcome Craig Lewis, as the new Chief Economist and Director of RiskFin.

Before us this morning are a pair of companion releases that would implement certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and take other important action. As the recommendations have been discussed already in detail, and I generally support them, I’ll keep my remarks brief.

The Dodd-Frank Act amended the Advisers Act to repeal the “private adviser exemption,” which advisers to many hedge funds and other funds have relied on to avoid registration with the agency. This was a critical step in bringing important Commission oversight into the private fund industry, and was long overdue.

Although Congress provided exemptions from registration for advisers to venture capital funds and advisers to private funds with assets under management in the United States of less than $150 million, it mandated that, in the public interest and for the protection of investors, the Commission adopt rules requiring these advisers to maintain records and provide reports.

Among other things, the staff recommends today that we adopt rules to implement the reporting requirement for exempt reporting advisers and amend Form ADV more generally. I believe that the information reported will be critical, as we do not want potentially important segments of the industry to remain opaque to regulators. In my view, our regulatory oversight cannot be truly effective without transparency.

Although I appreciate the staff’s recommendation regarding the disclosure items that exempt reporting advisers will be required to complete—and not complete—I would have preferred broader informational requirements, consistent with the legislative determination that these advisers be exempt but reporting. I remain concerned about whether the information these advisers provide will be sufficient to meet our regulatory needs; I continue to believe adamantly that fulsome information is a critical underpinning of sound regulation. Thus, I think that reconsideration is warranted, and strongly support the Chairman’s direction to the staff that we revisit these requirements within one year.

Also, I would note that although the staff has previously estimated that 4,100 advisers would be required to withdraw their registrations and register with state securities regulators, the estimate has now shrunk significantly, more than 20% in fact, to fewer than 3,200. This strengthens the points I made recently about the insufficiency of the Commission’s examination resources in the investment adviser area, and further accentuates the need to address this issue now.

Regarding the final rules to define “venture capital fund,” I believe that we generally achieved a balanced definition. I appreciate the staff’s efforts there, and their recommendations regarding the 20% non-qualifying basket. I expect that we will continue to monitor the application of this basket, however, to ensure that it is consistent with our intent.

Thank you.



Modified: 06/23/2011