Although Dodd-Frank eliminated the private investment adviser exemption used frequently by foreign investment advisers, the Act did provide a narrow registration exemption for “foreign private advisers.” A foreign investment adviser that does not qualify as a foreign private adviser is subject to registering as an investment adviser in the United States.

A foreign private adviser is any investment adviser who (1) has no place of business in the United States; (2) has fewer than 15 clients and investors in the United States in private funds advised by the adviser; (3) has aggregate assets under management attributable to clients in the United States and investors in the United States in private funds advised by the investment adviser of less than $25 million; and (4) does not hold itself out generally to the U.S. public as an investment adviser, and does not act as an investment adviser to any registered investment company or a business development company.

The new rules clarify the application of this narrow exemption for foreign investment advisers, particularly with respect to how foreign advisers determine whether a client or investor is in the United States and how foreign advisers count clients and investors. In addition, the SEC made it clear that this exemption is not available to an adviser that advises a business development company regardless of the size of such company, and that this exemption is not available to a foreign adviser that holds itself out generally to the public in the United States as an investment adviser.