Maryland Securities Commissioner Issues New Order Adopting a Private Fund Exemption Based on Model NASAA Rule

On June 15, 2012, the Maryland Securities Commissioner issued an order adopting the NASAA model rule exemption for investment advisers to private funds.

Like the model rule, the new order issued by the Maryland Securities Commissioner, provides for an exemption from registration for “private fund advisers”, which is any investment adviser who provides advice solely to one or more private funds (i.e. a 3(c)(1) fund or a 3(c)(7) fund).   A private fund adviser must not be subject to disqualification from prior bad acts such as fraud or other securities law violations.  The private fund adviser must also make the same Form ADV filings as an exempt reporting adviser would. [Read more…]

Missouri Commissioner of Securities Proposes New Private Fund Exemption Based on Model NASAA Rule

On April 26, 2012, the Missouri Commissioner of Securities proposed revised regulations exempting certain private fund managers from investment adviser registration with the State of Missouri.

Background

Prior to the repeal of the federal 15-client exemption, Missouri had an exemption for fund managers who were exempt under the old federal 15-client exemption and who managed investments solely for private funds with at least $5 million under management.  After the repeal of the federal 15-client exemption, fund managers have relied on a No-Action Determination by the Missouri Commissioner of Securities dated July 20, 2011, which allowed private fund managers in Missouri to continue to rely on Missouri’s old exemption, until the earlier of June 28, 2012 or the promulgation of a new exemption, notwithstanding the repeal of the federal 15-client exemption.  Now, it appears that the Missouri Commissioner of Securities is ready to adopt that new exemption. [Read more…]

Massachusetts Securities Division Adopts Final Private Fund Adviser Exemption Based Upon NASAA Model Rule

Previously, I reported that the Massachusetts Securities Division had proposed an exemption from investment adviser registration for advisers to private funds.  In late winter, the division adopted these regulations as final (with small changes).  They are, more or less, identical to the NASAA model rule and include the model rule’s grandfathering provisions.

As part of the rule, advisers to 3(c)(1) private funds (that are not venture capital funds) must, among other requirements, accept only qualified clients (as defined in SEC regulations) as investors.  However, under the grandfathering provision, an adviser to a 3(c)(1) private fund may have non-qualified clients as investors only if the fund ceased to accept non-qualified clients as of February 3, 2012.  (In the previous proposed rule, this date was March 30, 2012). [Read more…]

Virginia Division of Securities Proposes New Private Fund Exemption Based on Model NASAA Rule

On February 14, 2012, the Virginia Division of Securities and Retail Franchising proposed revised regulations exempting certain private fund managers from investment adviser registration with the Commonwealth of Virginia.

Background

Prior to the repeal of the federal 15 client exemption, Virginia had an exemption for fund managers that met the federal 15 client exemption and who advised only “corporation[s], general partnership[s], limited partnership[s], limited liability compan[ies], trust[s] or other legal organization[s]” with assets of $5 million or more.  This of course means that this exemption, left untouched, would no longer be available because of the repeal of the federal 15 client exemption. Pursuant to a Statement of Policy Regarding Regulation of Certain Investment Advisors Managing Private Equity and Venture Capital Funds (“Private Advisors”) dated July 19, 2011, the Virginia Division of Securities & Retail Franchising extended this exemption to advisers who previously were exempt from registration under the federal 15 client exemption, until such time as a more permanent approach could be adopted.  Now, the Division has proposed new regulations for comment, which have a target effective date of May 1, 2012. [Read more…]

California Department of Corporations Proposes New Private Fund Exemption

On December 15, 2011, the California Department of Corporations proposed revised regulations exempting certain private fund managers from investment adviser registration with the state of California.

Background

Previously, under Cal. Code Regs. tit. 10, § 260.204.9, private fund managers in California were exempt from investment adviser registration if they met the federal 15 client exemption, and they had assets under management of $25 million or more or they provided investment advice solely to “venture capital companies.”  On June 13, 2011, the California Department of Corporations amended this rule to remove the reference to the federal 15 client exemption.  Under this change, a private fund manager is exempt if it “(1) does not hold itself out generally to the public as an investment adviser, (2) during the course of the preceding twelve months has had fewer than 15 clients, (3) does not act as an investment adviser to any investment company registered under… the Investment Company Act of 1940…, and (4) either (i) has assets under management… of not less than $25,000,000 or (ii) provides investment advice to only venture capital companies…”[1] [Read more…]