What changed between these versions
A substantive modification. v2 directly increases the exemption threshold for certain private fund investment advisers from $150 million to $175 million. Additionally, the inflation adjustment mechanism is revised, changing the adjustment frequency from annual to every five years and adding a new instruction to round the adjusted amount to the nearest million.
Overview
A handful of significant changes. · v2 clarifies and modifies the inflation adjustment mechanism while also directly increasing the initial exemption threshold, thereby expanding the scope of the exemption.
The most significant change in v2 is the direct increase of the private fund investment adviser registration exemption threshold from $150,000,000 to $175,000,000 in Section 203(m)(1) of the Investment Advisers Act of 1940. Additionally, the proposed inflation adjustment mechanism in Section 203(m)(5) has been modified from an annual adjustment to a quinquennial (every five years) adjustment, and a rounding instruction has been added. The short title of the Act remains unchanged.
Modifications
Investment advisers of private funds will immediately benefit from a higher exemption threshold, allowing more firms to potentially qualify for the exemption from SEC registration without waiting for an inflation adjustment. This directly expands the scope of the exemption.
Before
v1 did not explicitly state the dollar amount for the exemption threshold in its text, but implicitly referred to the existing $150,000,000 threshold in Section 203(m)(1) of the Investment Advisers Act of 1940, which it aimed to adjust for inflation.
After
v2 explicitly amends Section 203(m)(1) of the Investment Advisers Act of 1940 to change the dollar amount from "$150,000,000" to "$175,000,000".
Investment advisers will experience less frequent adjustments to the exemption threshold, providing more stability but potentially slower responsiveness to inflation. The explicit rounding instruction provides clarity on how future adjustments will be calculated. The removal of the initial adjustment is offset by the direct increase of the base threshold.
Before
v1 proposed an inflation adjustment mechanism that would first adjust the dollar amount upon enactment to reflect CPI changes since 2010, and then adjust it annually thereafter based on CPI.
After
v2 proposes an inflation adjustment mechanism where the Commission shall adjust the dollar amount every 5 years to reflect CPI changes, and explicitly states that the amount should be rounded to the nearest multiple of $1,000,000. The initial adjustment upon enactment is removed, as the base amount is directly increased.
Scope
Meaningful expansion or narrowing — Changes are concentrated within a single section (Section 2) of the bill, which amends a specific part of the Investment Advisers Act of 1940. — v2 refines the policy direction of v1 by directly increasing the threshold and modifying the adjustment frequency, but maintains the core intent of providing an inflation-adjusted exemption for private fund advisers. — The changes directly modify the statutory language of Section 203(m) of the Investment Advisers Act of 1940, impacting the criteria for exemption from registration for certain investment advisers.
Impact analysis
Investment advisers of private funds currently managing between $150,000,000 and $175,000,000 in assets.
Gain (exemption from registration).
These advisers, who would have been required to register under the previous $150,000,000 threshold (or wait for an inflation adjustment), will now immediately qualify for the exemption from registration under the increased $175,000,000 threshold.
All investment advisers of private funds subject to the exemption threshold.
Procedural change with potential for slower benefit realization from inflation adjustments.
The frequency of future inflation adjustments to the exemption threshold will change from annual to every five years. The method for rounding future adjustments is also specified.
The Securities and Exchange Commission (SEC).
Procedural change.
The SEC's mandate for adjusting the dollar amount is changed from an initial adjustment upon enactment and then annually, to an adjustment every five years, with an explicit rounding instruction.