On June 22, 2011, making formal what had been widely expected, the SEC extended to March 30, 2012, the deadline for previously exempt investment advisers, now required under the Dodd-Frank Act to register with the SEC. For many years, advisers to private funds have been able to avoid registering with the SEC because of an exemption that applies to advisers with fewer than 15 clients – an exemption that counted each fund as a client, as opposed to each investor in a fund. As a result, some advisers to hedge funds and other private funds have remained outside of the SEC’s regulatory oversight even though those advisers could be managing large sums of money on behalf of hundreds of investors. Title IV of the Dodd-Frank Act eliminated this private adviser exemption. Consequently, many previously unregistered advisers, particularly those to hedge funds and private equity funds, will have to register with the SEC and be subject to its regulatory oversight, rules and examination.
While many private fund advisers will be required to register, some of those advisers may not need to if they are able to rely on one of three new exemptions from registration under the Dodd-Frank Act, including exemptions for:
- advisers solely to venture capital funds
- advisers solely to private funds with less than $150 million in assets under management in the U.S.
- certain foreign advisers without a place of business in the U.S.
The SEC can still impose certain reporting requirements for advisers relying upon either of the first two of these exemptions. Under the new rules, exempt reporting advisers will nonetheless be required to file, and periodically update, reports with the SEC, using the same registration form as registered advisers. Rather than completing all of the items on the form, exempt reporting advisers will fill out a limited subset of items.
Given the typical timing for registrations to take effect, advisers forced to register under the new rules will need to file their initial Form ADV application with the SEC by February 14, 2012. Those previously registered advisers who no longer qualify for SEC registration will be required to withdraw by June 28, 2012.