Funds & Advisers
On June 22, 2011, the SEC adopted numerous final rule amendments to the Investment Advisers Act required by the Dodd-Frank Act. We have summarized the main provisions of the amendments below. Please contact us if you need assistance due to these recent changes.
Final Rules Affecting Adviser Registration
Amendments to Form ADV Part 1
- Regulation of mid-sized advisers – those advisers with AUM less than $100MM –transfers to state regulators in most states. In general, mid-sized advisers will transition to state registration in the first half of 2012.
- Advisers to private funds with AUM of $150MM or more must register with the SEC.
- Advisers solely to private funds with less than $150MM AUM, advisers to venture capital funds, and foreign private advisers are exempt from registration.
- The rules also create a new reporting regime for exempt reporting advisers (exempt private fund advisers and foreign private advisers), who will have to submit a limited Form ADV Part 1.
Advisers are now required to provide additional information in several areas.
The new Form ADV Part 1 is now available. To highlight the changes, the SEC released a redline comparison of Part 1.
- Information on any private funds they advise.
- Whether the adviser has $1 billion or more in assets on its balance sheet. These advisers could be subject to rules regarding certain excessive incentive-based compensation arrangements.
- Contact information for the CCO. This information will not be made public.
- Whether a control person of the adviser is a public reporting company.
Amendments to the Pay-to-Play Rule Ban on Third-Party Solicitation
The list of regulated persons an adviser is permitted to pay to solicit government clients now includes registered broker-dealers, registered investment advisers and registered municipal advisers. This backtracks from the rule proposal, which would have permitted advisers to only pay registered municipal advisers. The SEC made it clear that the Pay-to-Play Rule applies to both exempt reporting advisers and foreign private advisers.
The amendments also extend the compliance date from September 13, 2011 to June 13, 2012. This extension applies only to the ban on third-party solicitation. The compliance dates for the remainder of the Pay-to-Play Rule are unchanged.