On June 22, 2011, the SEC adopted certain rules and amendments that implement various federal securities initiatives focusing on investment advisers under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Essentially, the world falls into two broad categories, foreign investment advisers and U.S. investment advisers. Those U.S. investment advisers and foreign investment advisers that do not qualify for the “foreign private adviser” exemption discussed below are further distinguishable by whether they (1) act as investment advisers solely to venture capital funds, (2) act as investment advisers solely to private funds, (3) are family offices providing investment advice solely to family clients, or (4) act as investment advisers to persons in addition to, or other than, venture capital funds, private funds, or family clients.

The new rules do not change the basic analysis for determining whether a person is an investment adviser. Specifically, a person is an investment adviser if that person is engaged, for compensation, in the business of advising others with respect to securities. For example, a person who advises others with respect to assets that are not “securities” under the Investment Advisers Act is not an investment adviser under the old or new rules.

Nor do the new rules change the fact that an investment adviser to a registered investment company must register with the SEC regardless of the size of the registered investment company.

Where the new rules have an impact is in determining whether a person who, for compensation, is engaged in the business of advising others with respect to securities, must register with the SEC as an investment adviser, or is required to register at the state level. This impact is felt most in (1) the elimination of the private investment adviser exemption, which provided that any investment adviser was exempt from registration with the SEC if the investment adviser (a) had fewer than 15 clients in the preceding 12 months, (b) did not hold itself out to the public as an investment adviser, and (c) did not act as an investment adviser to a registered investment company or a business development company, as this change will require some previously exempt investment advisers to register; and (2) the increase in the threshold amount of assets under management needed to be permitted to register with the SEC instead of at the state level, with the amount being increased from $25 million to $100 million under management, as this change will require some SEC registered investment advisers to deregister with the SEC and register at the state level.

Investment advisers who previously relied on the private investment adviser exemption need to determine whether any of the new exemptions apply or whether they need to register with the SEC (or at the state level). The SEC registration deadline for advisers previously relying on the private investment adviser exemption is March 30, 2012, which results in filing the investment adviser registration form, Form ADV, by no later than February 14, 2012.