The Commissioner of the California Department of Corporations recently proposed a series of new and revised rules that, if adopted, will have two impacts. First, certain unregistered hedge fund advisers having offices or clients in California will be required to register with the State or the Securities and Exchange Commission. California rule 260.204.9 is proposed to be amended to limit the application of California’s private adviser exemption. The amended rule would remove the ability of certain unregistered advisers with fewer than 15 clients and more than $25 million in assets under management to avoid California (or SEC, if available) registration unless they were advisers only to venture capital companies (as defined in the rule). If adopted, this would affect unregistered advisers with offices in California or, if out-of-state, with six or more California clients.

Second, California registered advisers will be subject to new rules that are intended to conform California’s regulatory regime in certain respects to the model rules of the North American Securities Administrators Association and with analogous SEC rules.

The comment period for the registration exemption proposal ends on November 26 and, for the additional rule proposals, on October 30.

For copies of the rule proposals, see PRO 41/06 and PRO 27/03 on the Department’s website.