Non-U.S. Private Fund Managers will be required to register with the SEC.

On July 21, 2010, President Obama signed into law the Private Fund Investment Advisers Registration Act of 2010 (the “Registration Act”), which was passed by the U.S. Congress as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping overall reform of the U.S. financial system. The Registration Act has significant ramifications for non-U.S. Private Fund Managers (managers of private equity funds, hedge funds and fund of funds). In general, all Private Fund Managers with $150 million or more in "assets under management in the U.S." will be required to register as investment advisers with the United States Securities and Exchange Commission (the SEC) by July 21, 2011. The meaning of the term "assets under management in the U.S." will be spelled out in regulations to be adopted by the SEC.

The Registration Act introduces several new exemptions from registration, but these exemptions are intended primarily to benefit advisers to venture capital funds and family offices. There is also an exemption for "foreign private advisers" but it only applies to non-U.S. advisers with (across all funds they manage) fewer than 15 U.S. investors and less than $25 million in assets under management attributable to U.S. investors (note that this threshold can be increased by the SEC).

Registered investment advisers will be subject to a number of substantive rules and record keeping requirements. The substantive rules include restrictions on the terms of advisory agreements, custody of client assets, contributions to candidates for certain government posts, and performance reporting. Registered investment advisers are also required to establish a code of ethics and compliance policies designed to prevent violations of the Registration Act, and appoint a chief compliance officer.

Because the registration requirements of the Registration Act are not effective until July 21, 2011 the advice seems to be for non-U.S. Private Fund Managers to hold off on registering until the SEC has issued regulations explaining how the new law will be applied to non-U.S. Private Fund Managers.