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By: Robert M. Crea, BCLP

Last year, as we previously reported, California Governor Newsom signed into law Senate Bill 54, Fair Investment Practices by Investment Advisers, which requires "covered entities," defined as a "venture capital company" that meets specific criteria, to collect and report sensitive demographic information about the founding team members of the businesses in which they invest. In signing that law, the Governor acknowledged that the law "contains problematic provisions and unrealistic timelines" and indicated that "cleanup language" would be proposed.

This year, the Governor enacted Senate Bill 164, "Fair Investment Practices by Venture Capital Companies" which provided for that cleanup language. Senate Bill 164 repeals and replaces Senate Bill 54, but the purpose of the law and much of the language remains the same. Senate Bill 164 amends the law in the following material respects:

• California's Department of Financial Protection and Innovation will now oversee the law instead of the Civil Rights Department.

• The law has narrowed the definition of "covered entities" subject to reporting so that the law will apply generally to venture capital funds. The prior definition of "covered entities" arguably picked up a broad variety of private funds beyond the venture capital industry. While the definition of "covered entities" has been nar......................

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