The House Financial Services Committee on Wednesday plans to markup the Investment Advisers Modernization Act of 2016, legislation that seeks to modernize outdated sections of the Investment Advisers Act of 1940.

The bill, H.R. 5425, introduced Monday by Robert Hurt, R-Va., is co-sponsored by Juan Vargas, D-Calif., Steve Strivers, R-Ohio, and Bill Foster, D-Ill., directs the Securities and Exchange Commission to amend certain rules related to advertising, custody, recordkeeping, brochure delivery and assignment of advisory contacts.

For instance, the bill would require the SEC to provide exceptions from the custody rule’s requirement of an annual surprise exam for certain categories of private funds.

Karen Barr, president and CEO of the Investment Adviser Association, noted in a statement that while the statutory framework of the Investment Advisers Act “has proven remarkably robust in protecting investors,” the financial services landscape has “evolved significantly over the last 75 years” and updates provisions of the Act that “impose undue burdens on investment advisors – most of which are small businesses – without commensurate investor benefit.”

As Barrr noted, the legislation, which IAA supports, would repeal a rule dating to the 1960s that prohibits advisors’ use of testimonials and references to past specific recommendations, where the materials are distributed solely to certain sophisticated clients and high-net-worth individuals, relying instead on well-established anti-fraud standards. 

The bill also amends the SEC’s “complex” custody rule, Barr said, “offering technical relief in situations involving privately offered securities that do not raise investor protection concerns.”

Jason Mulvihill, general counsel for the American Investment Council, noted in a statement that the legislation also updates Form PF so that private equity investment advisors do not have to provide “unnecessary information on their portfolio companies and preventing the SEC from expanding Rule 156 relating to the advertising of investment company funds to private fund offerings.”