Today Senate Banking Committee Chairman Chris Dodd (D-CT) released a sweeping financial regulatory reform bill entitled the Restoring American Financial Stability Act of 2010.

Title IV of the bill, the Private Fund Investment Advisers Registration Act of 2010, would require advisers to private funds with more than $100 million in AUM to register with the SEC as investment advisers and to disclose financial data about their trades and portfolios as necessary to assess monitor systemic risk and protect investors.

This data would be shared with a systemic risk regulator and the SEC would be required report to Congress annually on how it uses this data to protect investors and market integrity.

According the summary of the bill on the Banking Committee website, the private fund adviser registration provisions are meant to accomplish the following:

Raising Standards and Regulating Hedge Funds

• Fills Regulatory Gaps: Ends the “shadow” financial system in which hedge funds operate by requiring that they provide regulators with critical information.

• Register with the SEC: Requires hedge funds to register with the SEC as investment advisers and provide information about their trades and portfolios necessary to assess systemic risk. This data will be shared with the systemic risk regulator and the SEC will report to Congress annually on how it uses this data to protect investors and market integrity.

• Greater State Supervision: Raises the assets threshold for federal regulation of investment advisers from $25 million to $100 million, a move expected to increase the number of advisors under state supervision by 28%. States have proven to be strong regulators in this area and subjecting more entities to state supervision will allow the SEC to focus its resources on newly registered hedge funds.