On December 2, 2014, the House of Representatives passed the SBIC Advisers Relief Act of 2014 (SBIC Relief Act). The House also passed the Promoting Job Creation and Reducing Small Business Burdens Act on September 16, 2014, which contains the exact text of the SBIC Relief Act, amongst other acts. The bill that passed on December 2, 2014, was a stand-alone version of the SBIC Relief Act. Consequently, the SBIC Relief Act will be codified and enacted if either bill passes review by the Senate Committee on Banking, Housing, and Urban Affairs, and is then passed by the full Senate and signed by the president.
Under current law and regulation promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which amended the Investment Advisers Act of 1940 (Advisers Act), investment advisers are exempt from the requirement to register with the Securities and Exchange Commission if they either:
- solely advise Small Business Investment Company (SBIC) funds, or
- solely advise venture capital funds.
An investment adviser that advises both an SBIC fund and any other type of private investment fund (including a venture capital fund) does not currently qualify for either of the foregoing exemptions.
The SBIC Relief Act was introduced to amend the Advisers Act to prevent duplicative regulation of SBIC advisers and reduce costs for smaller investment advisers. The SBIC Relief Act, if enacted, would:
- preempt state registration requirements for investment advisers solely advising SBIC funds,
- amend the definition of “venture capital fund” to include SBIC funds for purposes of qualifying for the venture capital exemption (Rule 203(l)-1 under the Advisers Act), and
- exclude the assets of an SBIC fund from the calculation of assets under management for purposes of qualifying for the midsize private fund adviser exemption (Rule 203(m)-1 under the Advisers Act).
For a copy of the SBIC Relief Act, please contact any of the authors below.