Dodd-Frank Part I: Fund Adviser Registration
By David Feldman at 15 July, 2010, 9:59 am
It appears the Senate is poised to pass the Dodd-Frank Wall Street Reform and Consumer Protection Act in the next day or so, following the House’s passage late last month. The President is ready to sign it, possibly this weekend. Will Dodd and Frank’s names become as synonymous with securities law changes as Sarbanes and Oxley? Time will tell.
In the meantime, what does the bill say? Well there are tons of summaries of the several thousand page bill online that are available. Frankly, reading the bill (as I tried to do) is very difficult because it amends or repeals tons of existing laws that are simply cross-referenced in the bill. So the summary I’m providing here in the next few posts is a combination of various sources I have looked at that I consider credible. Lawyer disclaimer: don’t rely on this summary, get proper legal advice for your particular situation.
One of the most dramatic changes indirectly affecting the small and microcap markets is the new requirement for private fund advisers to register as investment advisers. The SEC has been wanting this for some time, but the industry understandably has been resisting. What are the highlights?
- Advisers to private funds with more than $100 million in assets must register as investment advisers. This makes them subject to the reporting and recordkeeping requirements as well as SEC inspection.
- No registration is required for an adviser who solely advises private funds and has less than $150 million under management in the US. But these entities are still subject to reporting and recordkeeping requirements.
- Venture capital firm advisers are exempt from this registration requirement, which is intended to hit hedge and private equity funds. The earlier Senate version exempted private equity advisers, but that did not make it into the final bill.
- The General Accounting Office is directed to investigate the possibility of setting up a “self-regulatory organization” like FINRA for private funds.
More to come.
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