On March 26, 2013, the SEC's Division of Trading and Markets issued a no-action letter indicating that it would not recommend enforcement action under Section 15(a)(1) of the Exchange Act if a venture capital fund adviser and its management company (collectively, the "fund") operated a platform through which its members could participate in Rule 506 offerings. The no-action letter is the first relief from broker-dealer registration for a platform that provides investors with a means to invest in start-up companies following the enactment of the JOBS Act. However, the no-action letter does not in any way address the JOBS Act's crowdfunding exemption, or the ability to conduct a Rule 506 offering using general solicitation, as those final rules have not yet been adopted by the SEC.

The fund is a Delaware corporation and venture capital fund adviser that solely advises venture capital funds. The fund identifies and performs due diligence on start-up companies for which the fund may wish to form investment funds. Once the fund decides to invest in a start-up company, it enters into a non-binding agreement with that company setting a target amount of capital for which the fund will invest. The fund then posts information provided by the start-up company on its website. Such information is available online only to the fund's members, all of whom must be accredited investors as defined in Rule 501 of Regulation D.

The fund's members may submit non-binding indications of interest in an investment fund offered on the fund's website in accordance with Rule 506. The fund then reconfirms investors' interest and accredited investor status, and negotiates the final terms of the investment fund's investment with the start-up company.

Investors provide funds for their investments in the investment fund directly or indirectly to a custody account subject to the Investment Advisers Act Rule 206(4)-2 at a custodian bank or trust company. Although the money invested by the investors may include administrative fees, the fund does not receive any compensation. The fund intends to be compensated in connection with its role in organizing and managing the investment funds at an anticipated rate of 20 percent or less of the profits of the investment fund, but never exceeding 30 percent.


The no-action letter does not address general solicitation issues or the crowdfunding exemption, but instead addresses whether the fund is a broker dealer. While the fund does not earn commissions on the sale of securities, it does take a carried interest. The carried interest only pays out if a fund returns its capital contributions. In addition, the fund does not propose to take a management fee. The SEC notes in the no-action letter that the fund's current activities appear to comply with Section 201 of the JOBS Act, in part because it and each person associated with it receives no compensation (or the promise of future compensation) in connection with the purchase or sale of securities. However, if the fund or persons associated with it receive compensation or the promise of future compensation, the fund will no longer be able to rely on Section 201 of the JOBS Act.