Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), many investment advisers who previously were not registered will be required to register either with the SEC if eligible or their state. Further, the eligibility requirements for SEC registration have changed, requiring certain investment advisers to deregister from the SEC. This alert is a very brief summary of these changes to aid your determination of whether you must register and with what regulator. While these rules are not yet final, they are expected to be adopted substantially as proposed. Further, these rules are very fact dependent, so please review the following five categories covered in this alert to determine your registration status:
- SEC Registered U.S. Adviser
- Unregistered U.S. Adviser
- Non-U.S. Adviser
- State Registered Adviser
- For All Advisers
- If You Are an SEC REGISTERED U.S. Adviser:
You will no longer be eligible and will be required to DEREGISTER from the SEC by October 19 (based on the new ADV Part 1 filing due August 20) if you have:
- less than $25 million Assets Under Management (AUM)
- between $25 million and $100 million AUM if you manage any separate accounts and are required by state law to register and be examined in your home state or a state where you have more than five clients
You may be permitted to deregister even if not required by the above if you have less than $150 million AUM and no separate accounts (i.e., your only clients are FUNDS). SEC reporting is still required beginning August 20.
If you deregister, you MAY need to register in your home state and any state in which you manage more than five clients.
- If You Are an UNREGISTERED U.S. Adviser:
You MUST REGISTER with the SEC by July 21 if you have:
- ANY separately managed accounts and more than $100 million AUM
- NO separately managed accounts (i.e., your only clients are FUNDS) and have more than $150 million AUM in the United States
- ANY separate accounts and have more than $25 million AUM and are exempt from registration and examination in your home state and any state in which you have an office or more than five clients
Even if you do not need to register with the SEC, you MAY need to register in your home state and any state in which you manage more than five clients.
- If You Are a NON-U.S. Adviser:
You MUST REGISTER with the SEC by July 21 if you:
- hold yourself out as an adviser in the U.S.
- have a place of business in the U.S.
- have more than 15 U.S. clients (including U.S. separate account clients AND any U.S. investors in your funds).
- have more than $25 million AUM from U.S. clients (in your separate accounts AND funds combined)
You do not need to register IF your only U.S. clients are FUNDS with less than $150 million total AUM in the United States; however, SEC reporting is still required beginning August 20.
- If You Are a STATE Registered Adviser:
You MAY need to register with the SEC by July 21 if you have ANY separate accounts and your AUM exceeds $100 million.
Keep an eye on state registration rules in your home state and any state in which you have more than five clients, some of which are expected to change in response to changes in SEC rules.
- For ALL Advisers:
In calculating AUM, you MUST include:
- proprietary assets
- no fee accounts
- non-U.S. accounts
- commitments (if you are a private equity fund manager)
There are SPECIAL SEC (not state) registration exemptions for:
- Family offices:
- no clients other than current or former members of a SINGLE FAMILY, key employees and related entities
- wholly owned and controlled by family members
- Venture capital fund advisers (SEC reporting still applies):
- only clients are PRIVATE FUNDS held out as venture capital funds
- funds own only cash and equity securities (80% directly acquired) and obtained without borrowing, in private standalone operating companies with limited borrowing and redemption
- funds must provide significant management assistance
Please note that other than the required deregistration described in Item 1 for advisers who are currently SEC registered, advisers may voluntarily remain registered with the SEC notwithstanding the availability of other exemptions.