Strictly Business

A Business Law Blog for Entrepreneurs, Startups, Venture Capital, and the Private Fund Industry.

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Hedge Fund Archives

Accredited Investors vs. Qualified Clients vs. Qualified Purchasers: Understanding Investor Qualifications

August 17, 2017 by Alexander J. Davie

image of a number of investors interesting in a productPrivate funds, such as hedge funds, private equity funds, and venture capital funds, are governed by a host of intersecting federal laws that impact who can invest in these fund, including the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, and the Investment Company Act of 1940. This post provides prospective and existing private fund managers with a basic understanding of the primary categories of investors and why understanding these categories is essential in structuring and marketing a fund.

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Filed Under: Private Equity and Hedge Funds Tagged With: Accredited Investor, Hedge Fund, PF Recent, Private Equity Fund, Private Fund, Qualified Client, Qualified Purchaser, Recent, Venture Capital Fund

Guide to Starting a Hedge Fund

March 28, 2017 by Alexander J. Davie

starting a hedge fundAs an investment manager looking into starting a hedge fund, you know that a successful launch is critical to standing out in the increasingly competitive investment management business. If you want to attract capital from the right investors, you must put in place the right team and structure for your new fund. Discounting the legal and regulatory complexity involved with forming a hedge fund or trying to wear too many hats could lead to early mistakes that stifle momentum and are expensive to fix. This post describes some key considerations for aspiring hedge fund managers who are contemplating the formation of a new fund.

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Filed Under: Private Equity and Hedge Funds Tagged With: Hedge Fund, Investment Adviser, PF Recent, Private Fund, Recent

SEC Enforcement Division’s Asset Management Unit Chief Reveals New Priorities in Regulation of Private Funds

January 9, 2013 by Alexander J. Davie

Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit, gave a speech entitled “Enforcement Priorities in the Alternative Space” on December 18, 2012. The recently established 75-member Asset Management Unit (AMU) is dedicated to investigating investment advisers, investment companies, hedge funds, mutual funds, and private equity funds making up the “alternative space” referred to in the speech’s title. Karpati addressed current enforcement priorities, touching upon, among other topics, the AMU’s enhanced expertise, investor risks, and how the hedge fund operating model incentivizes misconduct. As outlined in Karpati’s speech, the AMU’s current priorities indicate that, while traditionally hedge funds and private equity funds were lightly regulated, this will likely no longer be the case. [Read more…]

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Filed Under: Private Equity and Hedge Funds Tagged With: Fiduciary Duty, Hedge Fund, Investment Adviser, Private Equity, Private Fund, SEC, Securities, Securities Law Violations

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

June 22, 2012 by Alexander J. Davie

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…]

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Filed Under: Private Equity and Hedge Funds Tagged With: Blue Sky, Dodd-Frank, Exempt Reporting Adviser, Form ADV, Hedge Fund, Investment Adviser, Private Equity, Securities

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

May 9, 2012 by Alexander J. Davie

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…]

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Filed Under: Private Equity and Hedge Funds Tagged With: Blue Sky, Dodd-Frank, Exempt Reporting Adviser, Form ADV, Hedge Fund, Investment Adviser, Private Equity, Securities

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About the editor

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Strictly Business is a business law blog for entrepreneurs, startups, venture capital, and the private fund industry. Its editor is Alexander J. Davie, an attorney at Riggs Davie PLC based in Nashville, Tennessee. His practice focuses on corporate, securities, and business law. He works mainly with technology companies, including startups and emerging companies, and private equity, venture capital, and hedge funds.
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