Today, the Securities and Exchange Commission proposed a definition of “venture capital fund” for purposes of the new exemption from investment adviser registration under the Investment Advisers Act of 1940. This new exemption was created by Section 407 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Congress gave the SEC one year to issue final rules defining “venture capital fund”. It is important that the SEC adopt final rules as soon as possible because this will help California and other states conform to the new federal registration regime. I addressed some of the issues for California in these posts on July 29, August 2, and August 11.

Chairman Schapiro explained the focus of the SEC’s proposed definition in her opening remarks and noted that defining “venture capital fund” is “no small task”...