New Senate Proposal To Regulate Hedge Funds And Private Equity Funds

Senators Carl Levin and Charles Grassley introduced a bill on January 29, 2009, that would require all hedge and private equity funds with at least $50,000,000 of assets under management to register with the Securities and Exchange Commission (the "SEC") and establish anti-money laundering programs.

Hedge funds and other private investment funds (such as venture capital funds, private equity funds and "funds of funds") rely on exceptions to the definition of "investment company" to avoid registration under the Investment Company Act of 1940. These private investment funds generally rely on Sections 3(c)(1) and 3(c)(7) in order to avoid registration. Section 3(c)(1) generally provides for an exemption from registration of any fund whose outstanding interests are beneficially owned by not more than 100 persons. Section 3(c)(7) provides an exemption for any fund whose outstanding interests are owned exclusively by "qualified purchasers" (generally defined to be persons