WASHINGTON, DC - In an effort to protect taxpayers, investors, and the U.S. economy, U.S. Senator Jack Reed (D-RI) is introducing an amendment to the Wall Street reform bill that would increase transparency, close existing loopholes, and require all investment pools, including hedge funds, private equity funds, and venture capital funds, to register with the Securities and Exchange Commission (SEC).

Specifically, the Reed amendment would:

• Close the loophole on private equity and venture capital exemptions. Right now, only hedge fund advisers would be required to register under the bill, and there are exemptions for other private pool advisers, including private equity and venture capital advisers. Reed's amendment would require all of these advisers to private pools to register with the SEC.

• Ensure that the new adviser registration threshold does not weaken existing oversight. Reed's amendment requires advisers that fall below the new $100 million adviser registration threshold to either be registered and examined by a state regulator, or registered with the SEC.

• Free up SEC resources to focus on larger companies without sacrificing oversight of those that will fall below the new threshold.

"Hedge funds, private equity, and venture capital funds have played an important role in providing liquidity to our financial system and improving the efficiency of capital markets. But as their role has grown so have the risks they pose. This amendment will shut down loopholes and provide the SEC with long-overdue authority to examine and collect data from this key industry," said Reed, who chairs the Banking Subcommittee on Securities, Insurance, and Investment.

"I believe it is important if we are going to prevent future crises that we have the best data possible to monitor potential risks," said Senator Johnson, a senior member of the Banking Committee. "While I think the Dodd bill takes a good step forward by requiring hedge fund advisers to register with the SEC, I am concerned that advisers who today are managing hedge funds could tomorrow be operating a private equity or venture capital fund in order to avoid registration. It is important that we require registration by hedge funds, private equity and venture capital to collect the best data on these firms, fill regulatory gaps and prevent regulatory arbitrage."

Under current law, private funds are not subject to the same set of standards and regulations as banks and mutual funds, reflecting the traditional view that their investors are more sophisticated and therefore require less protection. This has enabled private funds to operate largely outside the framework of the financial regulatory system even as they have become increasingly interwoven with the rest of the country's financial markets. As a result, there is no reliable data on the number and nature of these firms or ability to calculate the risks they pose to America's broader economy.

"These firms are an important part of our economic engine, but they can also present systemic risks and can defraud pension plans and other investors. The financial crisis is a stark reminder that transparency and disclosure are essential in today's marketplace. Improving oversight of hedge funds and other private funds is vital to their sustainability and to our economy's stability. This amendment will help modernize our outdated financial regulatory system, protect investors, and prevent fraud" concluded Reed.

The Reed amendment is cosponsored by Senators Tim Johnson (D-SD) and Sherrod Brown (D-OH).