Bachus Amendment to House Hedge Fund Adviser Legislation Clarifies Fiduciary Duty
An important amendment offered by Financial Services Committee Ranking Member Spencer Bachus to the Private Fund Investment Advisers Registration Act, HR 3818, is designed to protect the fiduciary obligations that investment advisers owe their clients. The legislation gives the SEC the ability to define the term "client" in a broad manner. Rep. Bachus believes that clarifying this language is necessary to avoid unintended consequences. Thus, the Bachus Amendment clarifies that the SEC should not define the term "client" to include investors in a private fund managed by an investment adviser when that private fund has also entered into an advisory contract with the same adviser. According to Rep. Bachus, the Amendment would prevent advisers from being subjected to an irresolvable conflict of interest when they manage a pooled investment with the interest of each individual investor in mind.
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