In 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) eliminated the private fund adviser exemption. Prior to Dodd-Frank, many managers to hedge funds and private equity funds relied on this exemption from registration as investment advisers. After Dodd-Frank, many private investment fund managers were required to register with the U.S. Securities and Exchange Commission (SEC) as investment advisers. These investment advisers are now subject to significant on-going compliance obligations and examination by the SEC.
This Alert presents a brief synopsis of key compliance dates for SEC-registered investment advisers managing private investment funds. This summary is not intended to be a comprehensive review of all of the compliance and filing obligations for advisers or address the registration thresholds; rather we are providing this to our clients and friends to serve as a general roadmap and reminder of the important dates. Investment advisers registered with states should consider state requirements.
Selected Filing Deadlines
The following filings must be made within 45 days after the calendar-year end (February 17, 2015):
- Institutional investment managers that exercise investment discretion over $100 million or more in Section 13(f) securities must file Form 13F for the year ending December 31. 1
- Large traders (whose transactions in NMS securities equal or exceed 2 million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month) must file Form 13H for the year ending December 31, even if there are no changes during the preceding year.2
- Registered investment advisers whose accounts are beneficial owners of more than 5% of a registered voting equity security and are eligible to file Schedule 13G instead of Schedule 13D must file an amendment to Schedule 13G. Investment advisers who are required to file Schedule 13D instead of Schedule 13G must “promptly” amend their filings for any material changes.
- Registered commodity trading advisers (CTAs) must file Form CTA-PR. This filing also satisfies the National Futures Association (NFA) Form PR requirement for the fourth quarter.3
The following filings must be made within 60 days after the calendar-year end (March 2, 2015)
- Commodity pool operator (CPOs) that claim an exemption or exclusion under U.S. Commodities Futures Trading Commission (CFTC) Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), or 4.13(a)(5) or CTAs that claim an exemption under 4.14(a)(8) must reaffirm their applicable notice of exemption.
- Large hedge fund advisers (with at least $1.5 billion regulatory assets under management (RAUM)4 attributable to hedge funds) must file Form PF within 60 days after the end of the adviser’s fiscal year. Large hedge fund advisers must also file Form PF 60 days after the end of each fiscal quarter.
- Large CPOs (with at least $1.5 billion or more assets under management attributable to commodity pools) must file Form CPO-PQR. This filing also satisfies NFA Form CPO- PQR for the fourth quarter.5
The following filings must be made within 90 days after the calendar-year end (March 31, 2015)
- Advisers with a calendar-year fiscal year must file their “annual updating amendment” to Form ADV which includes state notice filings and amendments to Form ADV Part 2, if any. Advisers should fund their IARD account in advance to ensure that they are able to meet the filing deadline.
- Small and mid-size CPOs are required to file portions of Form CPO-PQR. Form PF filers that file CFTC Form CPO-PQR (Schedule A plus Schedule of Investments) by March 2 or March 31, 2015, depending on AUM, will satisfy this requirement. This filing also satisfies NFA Form CPO- PQR for the fourth quarter.6
- Registered CPOs must file and distribute audited financial statements (a pool’s Annual Report) within 90 days after a pool’s fiscal year end, certified by an independent public accountant, to each participant in each pool it operates. CPOs can submit a request for extension for a fund-of-funds.
The following filings must be made within 120 days after the calendar-year end (April 30, 2015)
- Calendar-year filers’ deadline for delivering to clients a current brochure (Form ADV Part 2A) with a summary of material changes or a summary of material changes with an offer to provide the brochure.
- Most advisers provide investors with annual audited financial statements to alleviate certain requirements of the custody rule (such as the surprise exam). As a result, these advisers with a calendar-year must deliver annual audited financial statements to investors.7
- Private equity fund advisers and smaller private fund advisers with a calendar-year end must file Form PF.
Additional Compliance Requirements
In addition to the specific compliance deadlines outlined above, investment advisers should also incorporate the following annual obligations into their compliance calendar:
- Rule 206(4)-7 of the Investment Advisers Act of 1940 requires advisers to conduct an annual compliance review by reviewing their policies and procedures to ensure their adequacy and effective implementation. In connection with this review, advisers should consider the SEC’s 2015 exam priorities8 and recent risk alerts.
- Advisers must collect a personal securities holdings report from each “access person” containing certain required information regarding securities holdings and securities accounts at the time the person becomes an access person, and then on an annual basis.
Advisers to private investment funds who are engaged in open or continuous offerings should consider their on-going obligations including:
- Annual amendments to SEC Form D on or before anniversary of initial Form D filing or most recent amendment. In addition, Form D must be amended as soon as practicable if there are any material mistakes of fact or error or to reflect a change in the information provided in the previously filed notice.
- Many states require annual renewal of state blue sky notice filings. In addition, updates to a blue sky filing may be required if there are material changes to information in the filing (e.g., name or address).
- Funds, their general partners, investment advisers and placement agents should obtain updated certifications and review their obligations under the Bad Actor Rule (Rule 506(d) of Regulation D).
The following is a brief list of best practices that we recommend advisers consider at least on an annual basis:
- Review disclosures in marketing materials, partnership agreements, offering memorandums and side letters for any certifications, notices and reporting obligations. Ensure that your disclosures in Form ADV, PF and your offering documents are consistent and representative of your business.
- Confirm ongoing monitoring of the ERISA plan asset threshold. Also, have you committed to deliver VCOC or REOC certifications?
- Consider seeking an annual representation from all fund investors as to any changes in their eligibility to participate in profits and losses from new issues.
- Review state and local lobbyist filings and monitor required obligations.
- Perform diligence on key service providers. Are there any material service level issues that need to be addressed? Distribute questionnaires, conduct on-site visits and background checks as necessary.