On November 19, 2010, the SEC proposed two releases that implement different aspects of the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (Dodd-Frank Act) applicable to investment advisers. The fi rst release (Implementing Release) for the most part concerns the mechanics of investment advisers registering and reporting following the Dodd-Frank Act. The second release (Exemptions Release) implements new exemptions from the registration requirements of the Investment Advisers Act of 1940 (Advisers Act). The new exemptions generally can be relied upon by investment advisers who are no longer able to rely upon the fewer than 15 client exemption in Section 203(b)(3) of the Advisers Act and who have assets under management in excess of the applicable floor following the enactment of the Dodd-Frank Act.

The above changes will frequently raise the federal floor for registration to $100 million, which generally bars smaller and mid-sized investment advisers from choosing federal registration over state registration. It will relieve some of the federal congestion that would have resulted from the narrowing of several Advisers Act exceptions in the Dodd-Frank Act, including, without limitation, the most commonly relied upon exemption in Section 203(b)(3) of the Advisers Act, which is the private advisers exemption for investment advisers that advise fewer than 15 clients. The SEC noted that as a consequence of Section 410 of the Dodd-Frank Act, the SEC estimated that approximately 4,100 SEC-registered advisers will be required to withdraw their registrations and register with one or more state securities authorities.