The Connecticut House of Representatives ended its legislative session for the year on June 3 without voting on S. 953, “An Act Concerning Hedge Funds.” The bill, sponsored by Senator Bob Duff, would have required investment advisers to private investment funds, including hedge funds, to make certain disclosures regarding material conflicts of interest to their clients. The measure was approved by the Senate in late May along party lines.

The final version of the bill was dramatically improved over earlier versions which, among other things, contained broad and unclear requirements regarding disclosures of affiliations and conflicts of interest, applied solely to hedge fund advisers, and included state licensing and registration requirements. MFA met with Chairman Duff on several occasions to discuss the potential unintended consequences of the provisions in the earlier drafts. The version that was adopted by the Senate mirrored existing SEC requirements for investment advisers registered under the Investment Advisers Act.

It is expected that the Connecticut legislature will return later this year in a special session to address the state’s budget short fall. S. 953 will not be germane to that debate.

In March 2009, the Banks Committee of the Connecticut General Assembly passed a bill, “An Act Concerning Hedge Funds” that will raise the minimum financial qualifications for hedge fund investors to $2.5 million and, for institutional investors, to $5 million.

In March 2009, the Joint Committee on Banks in Connecticut approved Senate bill 953, which among other things, would require investment advisers to hedge funds in Connecticut to disclose certain conflicts of interests to investors and prospective investors. The other two bills pending before the Committee, a registration bill and a bill that would require certain disclosures to pensions, were not reported and are effectively dead. Senate bill 953 is expected to be “filed” with in the next 10 to 15 days. A fiscal note will also be prepared to determine the financial cost to the State. The measure will then be placed on the Senate calendar. Previous incarnations of this bill were placed on the Senate calendar but were never considered by the Senate.Sponsors of the legislation continue to prefer Federal regulation of hedge funds and have indicated they are eager to see progress from Congress. It is likely that there is no appetite to move this measure to full Senate consideration. As a matter of procedure, the Senate must approve the bill before the House can consider it.MFA retained a local consultant and has already met with the Chairman of the Banks Committee in late February. MFA staff will meet with key Members of the State Legislature in the coming weeks.