Non-U.S. Investment Funds and Managers: Regulatory Framework for Raising Capital in the United States

Allen & Overy LLP
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U.S. regulation of money managers, including non-U.S. managers, and the funds they manage is a complex regime that has changed significantly since the implementation of the Dodd-Frank Reform and Consumer Protection Act of 2010 and continues to evolve as a result of, among other things, the Jumpstart Our Business (JOBS) Act enacted in 2012, the final Volcker Rule passed in December 2013, and U.S. regulatory agencies’ continued interpretation of the same. These changes and developments generally make more dramatic an already complex regulatory regime and provide an opportunity to revisit the scope of regulation a non-U.S. fund manager must consider in seeking to approach U.S. investors as a way to increase assets under management. That scope ranges from manager licensing requirements under multiple regulators to regulation of a manager as a broker-dealer/placement agent to fund structuring and offering restrictions.

Non-U.S. managers nonetheless can navigate these requirements by using a framework of exemptions designed to accommodate both U.S. and non-U.S. managers willing to limit some of their activities, including activities in the United States. This framework, which we describe in more detail below, can significantly reduce – and in some cases eliminate – the full scope of regulation imposed on asset managers, funds and broker-dealers/placement agents. This is critical, as the United States continues to be a significant source of investor capital for non-U.S. managers, and U.S. investors increasingly seek to diversify through exposure to non-U.S. asset classes and managers. Many non-U.S. managers, in fact, have recently undertaken a renewed interest in the United States markets, launching funds designed to accommodate U.S. investors looking to capitalize on emerging markets, European commercial real estate and global life sciences investments. Careful planning and structuring by non-U.S. managers can thus result in both business flexibility and consistent conformance with applicable laws.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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