I. Introduction

At an open meeting yesterday, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) adopted new rules and rule amendments under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), which: (i) will require advisers to hedge funds and other private funds to register with the SEC; (ii) establish new exemptions from SEC registration and reporting requirements for certain advisers that are exempt from registration (“exempt reporting advisers”); and (iii) reallocate regulatory responsibility for advisers between the SEC and the states.1 In addition, the Commission amended rules and Form ADV to expand the disclosure provided by registered investment advisers and to require certain items of Form ADV to be completed and reported by exempt reporting advisers. Also, the Commission revised its pay-to-play rule to allow advisers to pay compensation to solicitors who are registered as broker-dealers, investment advisers or municipal advisors if certain conditions are satisfied.2

The SEC also adopted a new rule that exempts “family offices” from regulation under the Advisers Act and provides a definition of such entities.3 All of the new rules and rule and form amendments arise out of Congressional directives contained in Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

The rules implement a transitional exemption period under which private fund advisers, including hedge fund and private equity fund advisers, are required to register under the Advisers Act. These advisers have until March 30, 2012, to register.

To provide for the transition of mid-sized advisers to state registration, the new rules require that all Commission-registered advisers file an amended Form ADV by March 30, 2012, indicating whether they are eligible to remain registered with the Commission. Those mid-sized advisers that are no longer eligible will be required to withdraw their Commission registration by June 28, 2012.

The rules setting forth exemptions for venture capital fund and certain private fund advisers, as well as the rule defining “family offices,” are effective July 21, 2011. The date by which advisers must comply with the general ban on the use of third-party solicitors to solicit government entity clients is being extended from September 13, 2011, to June 13, 2012.