Pension Security Act of 2009

At the very beginning of this year a bill was introduced to change the Employee Retirement Income Security Act of 1974 (ERISA) to require defined benefit plans to disclose their interest in hedge funds.  The definition of hedge fund for the purposes of the act is very broad and would likely include private equity funds, VC funds, real estate hedge funds and other pooled investment vehicles.  In the event that this bill was passed the DOL is likely to issue regulations providing more color on how and in what manner the disclosures will be made.

The Pension Security Act of 2009 was part of a broader flurry of bills introduced this year which are designed to increase regulation of the investment management industry in general, and hedge funds specifically.  I have included the full text of the act below and have also provided links to the various other bills which have been introduced since the recession began.

A hat tip to Doug Cornelius at Compliance Building for reporting this story a couple of weeks ago.

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Pension Security Act of 2009 (Introduced in House)

HR 712 IH

111th CONGRESS

1st Session

H. R. 712

To amend title I of the Employee Retirement Income Security Act of 1974 to require in the annual report of each defined benefit pension plan disclosure of plan investments in hedge funds.

IN THE HOUSE OF REPRESENTATIVES

January 27, 2009

Mr. CASTLE introduced the following bill; which was referred to the Committee on Education and Labor

A BILL

To amend title I of the Employee Retirement Income Security Act of 1974 to require in the annual report of each defined benefit pension plan disclosure of plan investments in hedge funds.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Pension Security Act of 2009′.

SEC. 2. DISCLOSURE IN ANNUAL REPORT OF INVESTMENTS IN HEDGE FUNDS BY DEFINED BENEFIT PENSION PLANS.

(a) In General- Section 103(b) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1023(b)) is amended–

(1) in paragraph (3)(C), by striking `value;’ and inserting `value, including, in the case of a defined benefit pension plan, a separate schedule identifying each hedge fund (as defined in paragraph 5) in which amounts held for investment under the plan are invested as of the end of the plan year covered by the annual report and the amount so invested in such hedge fund;’; and

(2) by adding at the end the following new paragraph:

`(5) For purposes of paragraph (3)(C), the term `hedge fund’ means an unregistered investment pool permitted under sections 3(c)(1) and 3(c)(7) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1), (7)) and section 4(2) of the Securities Act of 1933 (15 U.S.C. 77d(2)) and Rule 506 of Regulation D of the Securities and Exchange Commission (17 CFR 230.506).’.

(b) Effective Date; Regulations- The amendments made by subsection (a) shall apply with respect to annual reports for plan years beginning on or after the date of the enactment of this Act. The Secretary of Labor, in consultation with the Securities and Exchange Commission, shall issue initial regulations to carry out the amendments made by subsection (a) not later than 1 year after the date of the enactment of this Act.

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Other bills introduced into Congress:

Other hedge fund law articles related to ERISA and hedge funds:

Bart Mallon, Esq. runs hedge fund law blog and has written most all of the articles which appear on this website.  Mr. Mallon’s legal practice is devoted to helping emerging and start up hedge fund managers successfully launch a hedge fund.  If you are a hedge fund manager who is looking to start a hedge fund, please call Mr. Mallon directly at 415-296-8510.

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