The U.S. Securities and Exchange Commission adopted rules last month that require advisers to private funds, including hedge funds, to register with the SEC. The initial proposals were first introduced in November 2010 (see our post of December 19) and the final rules incorporate changes in response to public comments. Ultimately, the rules give effect to provisions of the Dodd-Frank Act that increase the statutory threshold for registration by investment advisers with the SEC, require hedge fund and other private fund advisers to register with the SEC and require reporting by certain advisers that are exempt from the registration requirements. Advisers falling under the requirements will have to be registered with the SEC by March 30, 2012.
Meanwhile, the SEC also announced the adoption of rules to implement new registration exemptions for advisers with less than $150 million in private fund assets under management in the U.S. and those that qualify as "foreign private advisers". Under section 202(a)(30) of the Investment Company Act of 1940, foreign private advisers are provided an exemption from registration where the adviser (i) has no place of business in the U.S.; (ii) has fewer than 15 clients and investors in the U.S. in private funds advised by the investment adviser; (iii) has aggregate assets under management attributable to U.S. clients of less than $25 million; and (iv) does not hold itself out to the U.S. public as an investment adviser. The new rules define a number of terms contained in the legislation, such as "investor", "place of business" and "assets under management", in order to clarify the application of the exemption.
As we discussed in October, Canadian securities administrators have meanwhile been working on their own proposals relating to registration of foreign investment fund managers who manage Canadian funds or have fund investors in a Canadian province or territory. The comment period on these proposals closed on January 13, 2011 and pursuant to recent amendments to National Instrument 31-103 that just came into force on July 11, 2011, these fund managers have been given a further deferral from registration until September 2012.