SEC Proposes Exemptions for Certain Private Fund Advisers
Mondaq Business Briefing › United States Law Articles in English (2011)
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SEC Proposes Exemptions for Certain Private Fund Advisers
Certain fund advisers that fit narrow definitions would be exempt from registration requirements imposed by the Dodd-Frank Act, but would still be required to comply with extensive recordkeeping and reporting obligations.
Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), referred to as the Private Fund Investment Advisers Registration Act of 2010, effected fundamental changes in the Investment Advisers Act of 1940 (Advisers Act) that will result in many previously unregistered advisers, such as advisers to private funds, having to register with the U.S. Securities and Exchange Commission (SEC) or one or more state regulators absent an exemption from registration. When the Dodd-Frank Act was signed into law on July 21, 2010, most of its impact had not yet been determined, as the implementation was left in the hands of industry regulators. Now the SEC has spoken. At an open meeting on November 19, 2010, the SEC voted to propose rules that would implement registration exemptions and reporting requirements for certain advisers, as required by the Dodd-Frank Act. In two companion releases, the SEC sets forth proposals to adopt registration exemptions for venture capital fund advisers, private fund advisers, and foreign private advisers (Exemptions Release),1 and also proposes a new rule requiring exempt private fund advisers to file public reports on an expanded version of Form ADV (Reporting Release).2 Comments on the proposals must be submitted to the SEC by January 24 and may be submitted online at the SEC's website. EXEMPTION FOR VENTURE CAPITAL FUND ADVISERS The Dodd-Frank Act amended Section 203(l) of the Advisers Act to provide an exemption from SEC registration requirements for any investment adviser that acts as an investment adviser solely to one or more venture capital funds. There is no limit on the number of venture capital funds a venture capital fund adviser may advise and still qualify for the exemption. In general, venture capital funds, according to the SEC, are a subset of private equity funds and are typically unleveraged long-term investors in early-stage or small privately held companies, thereby limiting their ability to contribute to systemic risk. The Dodd-Frank Act also directed the SEC to issue final rules to define the term "venture capital fund" for the purposes of the exemption by July 21, 2011, and f...See the full content of this document
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