The SEC is moving much faster in releasing proposed rules after the SEC Open Meetings. After Friday morning’s open meeting discussing the exemption from registration for venture capital funds, the SEC has released the full text of the proposed rule merely several hours later. I have been waiting to see how broad this exemption will … Read more »
Category: Investment Advisers Act
Proposed Changes to Form ADV
The SEC has released its proposed changes to Form ADV to better deal with private fund registration and the exempt, but reporting required of venture capital funds: Release No. IA-3110 The Securities and Exchange Commission is proposing new rules and rule amendments under the Investment Advisers Act of 1940 to implement provisions of the Dodd-Frank … Read more »
Do You need State Licensing if You’re an SEC Registered Investment Adviser?
With Dodd-Frank‘s elimination of the 15 client exemption, thousands (my guess) of private fund managers will need to register with the Securities and Exchange Commission as investment advisers to their funds. For alternative investment funds, like real estate, you’ll need to look at whether you are giving advice regarding securities. If you have less than … Read more »
Is a Fund Manager an Investment Adviser?
Yes, for private investment funds, the general partner is generally considered an investment adviser under the Investment Adviser Act. Let’s start with the definition of an investment adviser from the Investment Advisers Act: “any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the … Read more »
Changes to the Qualified Client Standard
In addition to the changing standard for an accredited investor, the standard for a “qualified client” under the Investment Advisers Act is also changing. Section 418 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the SEC to increase the standard. SEC. 418. QUALIFIED CLIENT STANDARD. Section 205(e) of the Investment Advisers Act … Read more »
Fund Manager Fraud for Exceeding Leverage Limits
It turns out that failing to adhere to your investment guidelines can not only get you sued by your investor, it can get you sent to jail. Mark D. Lay ran a hedge fund whose sole investor was the Ohio Bureau of Worker’s Compensation. The fund agreement had a non-binding 150% leverage guideline. Lay apparently … Read more »
Performance Fees for Private Investments Funds under the Investment Adviser Act
As more private investment funds will be pulled under the regulatory umbrella of the Investment Advisers Act,they will need to focus on the limitation on performance fees. Section 205(a)(1) of the Advisers Act generally prohibits any investment adviser, unless exempt from registration pursuant to Section 203(b) of the Advisers Act, from entering into, extending, renewing, … Read more »
A Closer Look at the new SEC Rule 206(4)-5 on Pay to Play
Over the weekend, the Securities and Exchange Commission released the full text of Rule 206(4)-5 in Release No. IA-3043. I made few notes during the broadcast of the open meeting, but there were lots of unanswered questions. Rule 206(4)-5 is only 12 pages long, but Release IA-3043 also includes another 190 pages of commentary and … Read more »
Chief Compliance Officers and Private Investment Funds
If you are running a private investment fund, do you need a chief compliance officer? If you are not registered with the SEC, it’s a gray area. If you are registered with SEC, then “yes.” Rule 206(4)-7 requires a registered investment adviser to “[d]esignate an individual (who is a supervised person) responsible for administering the … Read more »
Code of Ethics for an Investment Adviser
With the upcoming requirement that advisers to many private investment funds must register with the SEC, I figured it was time to look at some of the requirements that registration will impose. Section 204A of the Investment Advisers Act requires registered investment advisers to “establish, maintain, and enforce written policies and procedures reasonably designed, taking … Read more »