Investment Advisers Modernization Act of 2016

Floor Speech

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Mr. LYNCH. Mr. Speaker, I rise in opposition to H.R. 5424, the so- called ``Investment Advisers Modernization Act of 2016.'' Regrettably, instead of modernizing the regulation of investment advisors, as the bill's title suggests, the legislation under consideration today would take us back to a time when there was minimal transparency and reporting requirements for private firms such as private equity and hedge funds.

Over the past few months, I have been following the New York Times investigative series that exposed abuses by the private equity industry that impact our daily lives. I am concerned that private equity firms are now overtaking our fire departments, our ambulance services, our public water services, and our mortgage market. The influence of these private firms in services that traditionally have been provided by our government is resulting in slower reaction times for emergency services, aggressive collection practices, and the type of foreclosure abuse that we saw before the 2008 financial crisis. Given the increased influence of these firms in our daily lives, it is critical that we do not roll back crucial oversight and transparency requirements through this legislation.

I served on the Financial Services Committee during the 2008 financial crisis. I witnessed the harmful impact that the lack of regulation had on hard-working families around our nation. I had the honor of helping to reform our financial system through the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (The Dodd-Frank Act). The Dodd-Frank Act increased the transparency of private funds by requiring increased reporting and compliance requirements.

Unfortunately, this legislation would destroy much of the hard work we did through the Dodd-Frank Act. According to Americans for Financial Reform, the regulatory exemptions included in this bill would enable the exploitation of investors and would reduce the information available to regulators to address systemic risk. Specifically, this harmful legislation removes certain requirements made applicable by the Dodd-Frank Act to investment advisers to private equity funds and hedge funds, so that they do not have to notify their investors of ownership changes, report certain information on large private equity funds in their systemic risk reports to the Financial Stability Oversight Council, or annually deliver plain-text disclosures to clients. It also exempts these private funds from the annual independent audit requirement, which was strengthened by the Securities and Exchange Commission following the Bernie Madoff scandal.

A quarter of the investments in private equity funds comes from public pensions, which invest the retirement savings of our nation's teachers and firefighters. We cannot repeal these important protections for our nation's public servants.

In closing, this harmful bill would provide regulatory relief for an industry that needs more regulation. It is a dangerous step in the wrong direction. This is why I urge my colleagues to vote ``no'' on this bill.

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