June 22, 2011 |
SEC Adopts Rules Creating Adviser Registration Exemptions and Extends Registration Deadline
The Securities and Exchange Commission voted today to approve final rules imposing new registration and reporting requirements on investment advisers, pursuant to Title IV of last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act. Previously, advisers with fourteen or fewer clients were exempt from SEC registration requirements under the Investment Advisers Act of 1940. Title IV of Dodd-Frank repealed this exemption and required all investment advisers managing more than $150 million in assets (excluding advisers to venture capital funds) to register with the SEC within one year of the law’s enactment—less than one month from now. Fortunately, the Commission today extended this deadline by 8 months, meaning that advisers subject to registration requirements now have until March 30, 2012 to comply. The Commission also voted unanimously to broaden the definition of “venture capital” funds.
While exempted from SEC registration, advisers to venture capital funds and those with less than $150 million in assets under management will now face certain reporting requirements under the rules adopted today. The two Republican Commissioners voiced strong objections to the reporting requirements for these so-called “exempt reporting advisers,” saying they were too burdensome. This is the first time the SEC has developed a reporting regime for exempt advisers, also noteworthy because the SEC has the ability to conduct onsite visits based on the information reported.
Both registered advisers and exempt reporting advisers will have to complete an amended Form ADV. Exempt reporting advisers will now have to complete part of Form ADV Part I, which includes basic identification information about the firm, business operations of its private funds, and relevant disciplinary information. Registered advisers must also disclose information about their business operations and affiliations, potential conflicts of interest, disciplinary history, and investment strategies, as well as information about the identities of critical “gatekeepers” such as auditors and prime brokers that provide services to the funds.
In addition, the Commission voted to narrow the definition of “family offices.”
If you have any questions about the new registration requirements or other compliance matters, please feel free to contact us.
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This information is not intended as legal advice. Readers should seek specific advice before acting with regard to the subjects mentioned herein.
Patomak Partners LLC is a financial services consultancy based in the Washington, DC area. Since early 2009, our firm's experienced consultants have provided an array of regulatory compliance services to private equity firms, hedge funds, mutual funds, and other investment advisors and investment companies. This communication is intended to highlight regulatory and compliance developments for these clients and other interested colleagues. If you would like to sign up for future emails or electronic alerts, please email info@patomak.com.