Legal Definitions - Dodd-Frank: Title IV - Regulation of Advisers to Hedge Funds and Others

Definition: Title IV of the Dodd-Frank Act clarifies the registration and record-keeping requirements for investment advisers of private funds, including hedge funds, to provide the Securities and Exchange Commission (SEC) and the Federal Deposit InsuranceCorporation (FDIC) with information necessary to evaluate systemic risk of these funds. This Title expands the registration requirements to include most private funds, eliminates some exemptions, and establishes a standard for identifying accredited investors.

Examples: Private funds, including hedge funds, are required to register as investment advisers with the FDIC and maintain records of their activity. These records must include information on assets under management, use of leverage, counterparty credit risk exposure, trading and investment positions, valuation policies and practices, types of assets, side arrangements or side letters, and trading practices. Investment advisers must also take steps to safeguard any assets over which they exercise control, including verification of the assets by an independent public accountant.

Explanation: This Title aims to enhance supervision and record-keeping of private funds, including hedge funds, to allow the FDIC to conduct analyses of systemic risk of these funds. Investment advisers of private funds must register with the FDIC and provide and maintain records regarding the fund’s activity. The records must include information necessary to the public interest, for the protection of investors, or for the assessment of the systemic risk of that fund. The Title also establishes the requirements for investment advisers to register with the state authorities and sets the standard for identifying accredited investors.