California Adopts New Private Fund Adviser Exemption


California has adopted a new exemption from the state’s investment adviser registration requirements that will require many investment advisers in the state to either submit a copy of their Form ADV to the state by October 26, 2012 or register as an investment adviser in California by November 26, 2012.


Historically, most private fund advisers in California have relied on a self-executing exemption from investment adviser registration in California, which provided an exemption for an adviser that (i) did not hold itself out to the public as an investment adviser, (ii) had fewer than 15 “clients” in the preceding 12 months, (iii) did not advise either a registered investment company or business development company, and (iv) either had assets under management of at least $25 million or advised only “venture capital companies” (the “Old CA Exemption”). The Old CA Exemption corresponded to a similar exemption from federal investment adviser registration pursuant to Section 203(b)(3) of the Investment Advisers Act of 1940, as amended. The Dodd-Frank Act eliminated this exemption at the federal level, and is credited for eliminating similar exemptions at the state level.

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