New Section 203(m) of the Investment Advisers Act exempts from SEC registration as an investment adviser those U.S. advisers who advise solely “qualifying private funds” (as defined below) as long as the collective private fund assets are less than $150 million. U.S. advisers are required to include worldwide assets under management for purposes of calculating the $150 million threshold. If this threshold is exceeded, or if the investment adviser advises clients other than private funds, then the exemption is not available.

A “qualifying private fund” is a fund that is not registered under the Investment Company Act and is not a business development company under the Investment Company Act. Most often, these will be private funds exempt from registering under Section 3(c)(1) or 3(c)(7) of the Investment Company Act, but would also include a private fund exempt under another section of the Investment Company Act as long as the adviser treats such fund as a private fund under the Investment Advisers Act for all purposes.

The new rule provides that a foreign investment adviser, an adviser with a principal office and place of business outside of the United States, qualifies for the exemption if: (1) the foreign adviser has no client that is a U.S. person, except for one or more private funds and (2) U.S. attributable assets managed by the foreign adviser are less than $150 million. Foreign advisers relying on the new rule will continue to remain subject to the Investment Advisers Act's antifraud provisions.

Investment advisers that qualify for this exemption still have public reporting requirements on Form ADV. See the discussion below under “Exempting Reporting Advisers and Form ADV.