Last week, the Economic Growth, Regulatory Relief, and Consumer Protection Act became law, providing some revisions to Dodd-Frank and some new regulatory wrinkles. Some of those revisions apply to private funds.
Section 203 exempts Banks and Bank Holding Companies with (1) $10 billion or less in total consolidated assets and (2) total trading assets and trading liabilities of 5% or less of total consolidated assets from the Volcker Rule.
Section 204 allows hedge funds and private equity funds to share the name with a banking entity acting as its investment adviser provided that the investment adviser is not an insured depositary institution and the name does not contain the word “bank.” Interestingly, that new exemption would seem to apply to real estate funds or venture capital funds.
Section 504 Revises the exemption in 3(c)(1) of the Investment Company Act. it adds a new exemption for “qualifying venture capital funds” to have up to 250 investors instead of the 100 investors limit for other types of funds. A “qualifying venture capital funds” is a venture capital fund that has not more than $10 million in aggregate capital contributions and uncalled committed capital.
I suppose this allows venture capital fund managers to create a pool with a larger number of less wealthy investors that are making smaller commitments. Otherwise, to exceed 100 investors, a fund manager would have to use the 3(c)(7) exemption that requires investors to be Qualified Purchasers. This was a Senate amendment sponsored by Senator Heitkamp as the “Supporting America’s Innovators Act.”
Sources:
- Economic Growth, Regulatory Relief, and Consumer Protection Act
- Cleary Gottlieb Discusses New Law Revising Dodd-Frank Act by Derek M. Bush, Hugh C. Conroy Jr., Allison H. Breault, Zachary L. Baum and Rebecca F. Green
- Who Will Benefit From The Newly Passed Supporting America’s Innovators Act? by James Murphy