US Codex
Bill
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Title V — Investor protection and market transparency

S. 2155 · 116th Congress · Jul 17, 2019 · Lineage

V Investor protection and market transparency

Sec. 501 Disclosure of fees and returns

The Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) is amended by adding at the end the following:

“66. Disclosure of fees and returns

“(a) Definitions—In this section, the terms private fund and target firm have the meanings given the terms in section 3 of the Stop Wall Street Looting Act.

“(b) Rules—Not later than 1 year after the date of enactment of this section, the Commission shall issue final rules that require a private fund to, using generally accepted accounting principles, annually report the following information with respect to that private fund:

“(1) The name, address, and vintage year of the fund.

“(2) The name of each general partner of the fund.

“(3) The name of each limited partner of the fund.

“(4) A list of each entity with respect to which the fund owns a percentage.

“(5) In dollars, the total amount of regulatory assets under management by the fund.

“(6) In dollars, the total amount of net assets under management by the fund.

“(7) The percentage of fund equity contributed by the general partners of the fund and the percentage of fund equity contributed by the limited partners of the fund.

“(8) Information on the debt held by the fund, including—

“(A) the dollar amount of total debt;

“(B) the percentage of debt for which the creditor is a financial institution in the United States;

“(C) the percentage of debt for which the creditor is a financial institution outside of the United States;

“(D) the percentage of debt for which the creditor is an entity that is located in the United States and is not a financial institution; and

“(E) the percentage of debt for which the creditor is an entity that is located outside of the United States and is not a financial institution.

“(9) The gross performance of the fund during the year covered by the report.

“(10) For the year covered by the report, the difference obtained by subtracting the financial gains of the fund by the fees that the general partners of the fund charged to the limited partners of the fund (commonly referred to as the “performance net of fees”).

“(11) For the year covered by the report, an annual financial statement, which shall include income statements, a balance sheet, and cash flow statements.

“(12) The average debt-to-equity ratio of each target firm with respect to the fund and the debt-to-equity ratio of each such target firm.

“(13) The total gross asset value of each target firm with respect to the fund and the gross asset value of each such target firm.

“(14) The total amount of debt held by each target firm with respect to the fund and the total amount of debt held by each such target firm.

“(15) The total amount of debt held by each target firm with respect to the fund that, as of the date on which the report is submitted, are categorized as liabilities, long-term liabilities, and payment in kind or zero coupon debt.

“(16) The total number of target firms with respect to the fund that experienced default during the period covered by the report, including the name of any such target firm.

“(17) The total number of the target firms with respect to the fund with respect to which a case was commenced under title 11, United States Code, during the period covered by the report, including the name of any such target firm.

“(18) The percentage of the equity of the fund that is owned by—

“(A) citizens of the United States;

“(B) individuals who are not citizens of the United States;

“(C) brokers or dealers;

“(D) insurance companies;

“(E) investment companies that are registered with the Commission under this Act;

“(F) private funds and other investment companies not required to be registered with the Commission;

“(G) nonprofit organizations;

“(H) pension plans maintained by State or local governments (or an agency or instrumentality of either);

“(I) pension plans maintained by nongovernmental employers;

“(J) State or municipal government entities;

“(K) banking or thrift institutions;

“(L) sovereign wealth funds; and

“(M) other investors.

“(19) The total dollar amount of aggregate fees and expenses collected by the fund, the manager of the fund, or related parties from target firms with respect to the fund, which shall—

“(A) be categorized by the type of fee; and

“(B) include a description of the purpose of the fees.

“(20) The total dollar amount of aggregate fees and expenses collected by the fund, the manager of the fund, or related parties from the limited partners of the fund, which shall—

“(A) be categorized by the type of fee; and

“(B) include a description of the purpose of the fees.

“(21) The total carried interest claimed by the fund, the manager of the fund, or related parties and the total dollar amount of carried interest distributed to the limited partners of the fund.

“(22) A description of, during the year covered by the report, any material changes in risk factors at the fund level, including—

“(A) concentration risk;

“(B) foreign exchange risk; and

“(C) extra-financial risk, including environmental, social, and corporate governance risk.

“(23) Any other information that the Commission determines is necessary and appropriate for the protection of investors.

“(c) Periodic review—The Commission shall, with respect to the rules issued under subsection (b)—

“(1) review the rules once every 5 years; and

“(2) revise the rules as necessary to ensure that the disclosures required under the rules reflect contemporary (as of the date on which the rules are revised) trends and characteristics with respect to private investment markets.

“(d) Public availability—Notwithstanding any provision of section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b–4), the information disclosed under the rules issued under subsection (b) shall be made available to the public.”

Sec. 502 Fiduciary obligations

(a)
Fiduciary duties under ERISA— Section 401(b)(1) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1101(b)(1)) is amended—
(1)
by inserting “or a private fund (as defined in section 3 of the Stop Wall Street Looting Act)” before “, the assets”; and
(2)
by inserting “or such private fund, as applicable” before the period at the end.
(b)
Prohibition against waiving fiduciary duties— Section 211(h) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–11(h)) is amended—
(1)
in paragraph (1), by striking “and” at the end;
(2)
in paragraph (2), by striking the period at the end and inserting “; and”; and
(3)
by adding at the end the following:

“(3) promulgate rules that prohibit an investment adviser from requiring any person to which the investment adviser provides investment advice, including a pension plan (as defined in section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002)) that is subject to title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.), to, as a condition of the investment adviser providing that advice, sign a contract or other agreement in which that person waives a fiduciary duty owed by that person to another person.”

(c)
Applicability of benefits— The general partner of a private fund may not provide any term or benefit to any limited partner of the fund unless the general partner provides that term or benefit to all limited partners of the fund.

Sec. 503 Disclosures relating to the marketing of private equity funds

Any investment adviser to a private fund shall disclose to potential investors with respect to the other private funds, as defined in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)), managed by that investment adviser (referred to in this section as “managed firms”) the following information:
(1)
A list of all managed firms with respect to the investment adviser, including those managed firms that, as of the date on which the disclosure is made—
(A)
have active investments; and
(B)
have liquidated the assets of the firms.
(2)
For each managed firm listed under paragraph (1), the following information:
(A)
As applicable, the total term of the listed firm beginning with the commencement of the commitment period with respect to the firm and ending on the date on which the firm is dissolved, including, with respect to a listed firm that, as of the date on which the disclosure is made, is actively investing—
(i)
the term specified by any limited partnership agreement; and
(ii)
the nature of any provisions that would allow for the extension of that term.
(B)
The performance of the listed firm’s net of fees, as measured by the public market equivalent or a similar measure.
(C)
A list of target firms with respect to which the listed firm was a control person and the period of that control.
(D)
The number of employees at each target firm identified under subparagraph (C), as of the date on which the listed firm became a control person with respect to the target firm, and the date on which the listed firm ceased to be a control person with respect to the target firm.
(E)
A list of target firms with respect to the listed firm with respect to which a case has been commenced under title 11, United States Code.
(F)
For each target firm with respect to the listed firm, and with respect to which the listed firm is a control person—
(i)
a list of actions taken by any State or local regulatory agency; and
(ii)
any legal or regulatory penalties paid, or settlements entered into, by the general partners of the target firm or the target firm itself.
(3)
The percentage breakdown of the means employed by the investment adviser to divest ownership or control of target firms, including—
(A)
the sale of target firms to other private funds;
(B)
the sale of target firms to private entities;
(C)
the sale of target firms to issuers, the securities of which are traded on a national securities exchange;
(D)
the commencement of cases under title 11, United States Code, with respect to target firms; and
(E)
initial public offerings with respect to target firms.