Because of the investment adviser registration requirements and exempt reporting adviser filing requirements under the Investment Advisers Act 1940 as well as the enhanced reporting required of some private fund advisers to file Form PF, private fund advisers must make a yearly (or sometimes more frequent) calculation of their regulatory assets under management. Essentially this is a total tally of the assets over which the fund adviser provides investment advice, calculated using a method prescribed by the SEC. [Read more…]
Investment Adviser Archives
Massachusetts Schedules Public Hearing on Proposed Regulations on Private Fund Managers
Previously, I posted a summary of the status of state investment advisor registration requirements for private fund managers in the Northeast in wake of adoption of the Dodd-Frank Act. Massachusetts currently provides an exemption for investment advisers who only advise sophisticated clients such as “institutional buyers,” which include any “investing entity whose only investors are accredited investors… each of whom has invested a minimum of $50,000.” In April, the Massachusetts Securities Division proposed changes to its investment adviser registration regulations, which would phase out the institutional buyer exemption and introduce a new “private fund adviser exemption” A public hearing was held on June 23, 2011. After receiving comments, they revised the proposed regulations and released new revised proposed regulations on November 2, 2011. Originally, the Massachusetts Securities Division had planned on having another hearing on December 6, 2011, but this has been postponed until January 5, 2012. Interested parties will also have the right to introduce comments until January 6, 2012.The proposed regulation now make the following changes: [Read more…]
Deciphering the SEC’s New Definition of a “Venture Capital Fund”: Part 10 – What about existing funds?
This is the tenth post in a series exploring recent SEC regulations that define the term “venture capital fund” for the purposes of determining whether a fund’s manager is exempt from SEC registration requirements under the Dodd-Frank Act.
Previously in the first installment of this series, I provided a general overview of how the SEC has defined the term “venture capital fund.” A private fund manager that solely advises venture capital funds (as defined in SEC regulations) qualifies for an exemption from investment adviser registration under the Investment Advisers Act. In my subsequent posts, I described the requirements private funds must meet in order to qualify for this exemption. The requirements are quite specific, and therefore, many existing funds would be required to register, which would be an unanticipated consequence for these fund managers that relied on then-current law to structure their funds. Luckily, the SEC has provided grandfathering provisions in the regulations which exempt funds that raised their capital prior to the effectiveness of the new regulations. In this post, I will discuss such how grandfathering provisions work. [Read more…]
Deciphering the SEC’s New Definition of a “Venture Capital Fund”: Part 9 – Private Funds Only
This is the ninth post in a series exploring recent SEC regulations that define the term “venture capital fund” for the purposes of determining whether a fund’s manager is exempt from SEC registration requirements under the Dodd-Frank Act.
Previously in the first installment of this series, I provided a general overview of how the SEC has defined the term “venture capital fund.” A private fund manager that solely advises venture capital funds (as defined in SEC regulations) qualifies for an exemption from investment adviser registration under the Investment Advisers Act. There are five elements to the definition. The first element is that the fund must represent to investors and potential investors that it pursues a venture capital strategy. The second element is that no more than 20% of the fund’s total assets (including committed but not yet invested capital) can be invested in assets that are not “qualifying investments” or “short term holdings.” The third element is the fund cannot borrow in excess of 15 percent of the fund’s aggregate capital contributions and uncalled committed capital. The fourth element is that the fund cannot provide its investors with redemption rights, except in “extraordinary circumstances.” In this post, I will discuss the fifth and final element of the definition, which prohibits a VC fund from registering as an investment company. [Read more…]
Deciphering the SEC’s New Definition of a “Venture Capital Fund”: Part 8 – Restrictions on Redemption Rights
This is the eighth post in a series exploring recent SEC regulations that define the term “venture capital fund” for the purposes of determining whether a fund’s manager is exempt from SEC registration requirements under the Dodd-Frank Act.
Previously in the first installment of this series, I provided a general overview of how the SEC has defined the term “venture capital fund.” A private fund manager that solely advises venture capital funds (as defined in SEC regulations) qualifies for an exemption from investment adviser registration under the Investment Advisers Act. There are five elements to the definition. The first element is that the fund must represent to investors and potential investors that it pursues a venture capital strategy. The second element is that no more than 20% of the fund’s total assets (including committed but not yet invested capital) can be invested in assets that are not “qualifying investments” or “short term holdings.” The third element is the fund cannot borrow in excess of 15 percent of the fund’s aggregate capital contributions and uncalled committed capital. In this post, I will discuss the fourth element of the definition, which limits the redemption rights of investors in a venture capital fund. [Read more…]