SEC Proposed Rules to Implement Dodd-Frank Private Fund Adviser Registration Requirements


The Securities and Exchange Commission (SEC) has proposed new rules to implement certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requiring investment advisers to private funds, such as private equity funds, hedge funds and venture capital funds, to register with and/or report to the SEC for the first time, commencing in July of 2011, under the Investment Advisers Act of 1940 (Advisers Act). These proposals, included in a series of releases (Rules Releases or Rules Release, as applicable), would:

• Establish exemptions and exclusions from the Dodd-Frank Act’s registration and reporting requirements for certain advisers to private funds, including:

(i) an exemption from registration for advisers solely to private funds with less than $150 million in assets under management (AUM);

(ii) an exemption from registration for advisers solely to venture capital funds;

(iii) an exemption from registration and reporting for foreign private advisers; and

(iv) an exclusion from the definition of an investment adviser under the Advisers Act for “family offices” as defined by the SEC.

• Raise the threshold for permitted SEC investment adviser registration from $25 million in AUM to $100 million in AUM (with certain exceptions), thereby shifting more regulatory responsibility to the states.

• Establish new reporting requirements for private fund advisers that are currently required to register with the SEC, as well as “exempt reporting advisers,” such as advisers to venture capital funds and private equity funds with less than $150 million in AUM, who are not required to register, but will be required to file certain reports with the SEC.

• Expand the required disclosures for all registered investment advisers on Form ADV.

In addition, the SEC recently amended the so-called “pay-to-play” rules by adoption of new rule 206(4) 5 under the Advisers Act, which became effective on September 13, 2010.

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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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