President Obama signed into law the Fixing America’s Surface Transportation Act (FAST Act) on December 4, 2015 as we have previously written about in our Annual Compliance Alert here. The SEC stated in their most recent guidance update that as a result of the FAST Act, an adviser that currently relies on the Small Business Investment Company Adviser Exemption (SBIC Adviser Exemption) and advises only SBICs may instead chose to:

  • Rely on the venture capital fund adviser exemption and advise both SBICs and venture capital funds; or
  • Rely on the private fund adviser exemption and advise both SBICs and non-SBIC private funds as long as the non-SBIC private funds account for less than $150 million in assets under management.

Unlike an adviser relying on the SBIC Adviser Exemption, the SEC staff believes that when an SBIC adviser choses to rely on the private fund or venture capital fund exemption, the adviser is required to submit reports to the SEC as an exempt reporting adviser.

Additionally, the SEC staff notes that (i) advisers currently relying on the private fund or venture capital adviser exemption may obtain SBIC clients following the revised exemptions and (ii) certain registered advisers of SBICs may be eligible to withdraw their current registration and rely upon the private fund adviser or the venture capital fund exemption as exempt reporting advisers.

Finally, the Investment Management Division of the SEC is developing a recommendation to amend the definitions of the venture capital fund and private fund adviser exemptions in light of the FAST Act amendments to the Advisers Act. However, until any final rule changes are enacted an adviser may rely upon the FAST Act amendments.

The SEC’s Investment Management Guidance update can be read in full here.