RIA Compliance Blog
Rhode Island has substantially adopted its proposed private fund adviser exemption, which we previously discussed in a posting dated April 10, 2012. The new rule became effective on May 17, 2012. To qualify for the exemption, the adviser must advise only private funds as defined under SEC Rule 203(m)-1. Furthermore, if it advises non venture capital 3(c)(1) funds, for each such fund:
- The fund’s beneficial owners must meet the definition of a “qualified client” as defined in SEC Rule 205-3 after deducting the value of the primary residence;
- The private fund adviser has to disclose the following information in writing to each beneficial owner: (1) all service, if any, to be provided to beneficial owners, (2) all duties owed to beneficial owners, and (3) any other material information affecting the rights or responsibilities of the beneficial owners; and
- The adviser, on an annual basis, must obtain audited financial statements of each fund and provide a copy to the beneficial owner.
There was only one difference between the proposed and adopted rules. The second requirement listed above also included that the private fund adviser had to disclose in writing to the beneficial owner that the fund, and not the beneficial owner individually, is the adviser’s client. This is not required in the final rule.
Parker MacIntyre provides legal and compliance services to investment advisers, broker-dealers, registered representatives, hedge funds and issuers of securities, among others. Our regulatory practice group assists financial service providers with the complex issues that arise in the course of their businesses, including compliance with federal and state laws and rules.