SEC Tag Archives — Page 22 of 22

Virginia Adopts Private Adviser Policy Statement

July 20, 2011 | Steve Parker

The Virginia State Corporation Commission (Securities and Retail Franchising Division) yesterday adopted a policy statement providing guidance to advisers to private funds in light of the June 22, 2011 adoption of final rules adopted by the Securities and Exchange Commission. Specifically, the Virginia statement recognizes and addresses the “regulatory gap” created by the SEC Rule 203-1(e), which grants an extension to March 30 2012 for private advisers formerly exempt from registration under Investment Adviser Act Section 203(b)(3), which was repealed by Dodd-Frank, to register with the SEC.

As a consequence of Dodd-Frank, Virginia’s Rule 21 VAC 5-80-210A.7, which excludes from the definition of “investment advisers” certain advisers exempt under Section 203(b)(3) of the Investment Adviser Act, becomes a nullity on July 21, 2011. In the absence of the policy statement, the effect of this would be to require private advisers subject to Virginia registration requirements, and that have no other basis for exemption, to register in Virginia as investment advisers by July 22, 2011.
Continue reading ›

Advisers Act Rules Implementing Dodd-Frank Adopted by SEC

June 28, 2011 | Steve Parker

On June 22, 2011, the Securities and Exchange Commission (SEC) adopted new rules and rule amendments under the Investment Advisers Act of 1940 to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Among other things, the rules, as adopted, provided transitional provisions for investment advisers required to switch from SEC to state registration because they fail to meet the new requirement of $100 million in assets under management, require advisers to hedge funds and other private funds to register with the SEC, require reporting by certain exempt investment advisers, and make substantial changes to the Form ADV.

The final rule relating to transition differed somewhat from the rule originally proposed by the SEC. The final rule requires that any “mid-sized” registrant with the SEC (defined as any firm with between $25 million and $100 million under management) that is registered as of July 21, 2011 (Dodd-Frank’s effective date) must remain registered with the SEC through the transition. New applicants that meet the definition of mid-sized advisers and who seek to apply between January 1, 2011 and July 21, 2011 can apply either with the SEC or the state or states in which it must register.
Continue reading ›

SEC Defines Family Offices Exempt from RIA Registration

June 23, 2011 | Steve Parker

In a rule adopted yesterday, the Securities and Exchange Commission (SEC) adopted a rule defining “family offices.” “Family offices” are entities established by wealthy families to manage their wealth and provide other services to family members, such as tax and estate planning services. Family offices were exempt from registration as investment advisers with “fewer than fifteen clients” prior to passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, but when that act goes into effect on July 21, 2011, they will no longer be able to claim that broad exemption because it will be repealed.

In its place, as authorized by Congress, the SEC has exempted a new category of advisers that constitute “family offices.” A family office (1) provides investment advice only to “family clients,” as defined by the rule; (2) Is wholly owned by family clients and is exclusively controlled by family members and/or family entities, as defined by the rule; and (3) Does not hold itself out to the public as an investment adviser.
Continue reading ›

RIA Switch Deadline Still Not Formally Postponed

June 11, 2011 | Steve Parker

Although the US Securities and Exchanges Commission (SEC) has publicly stated that the July 21, 2011 deadline for “Mid-Sized Investment Advisers” to register with the States will likely be moved, as of yet there is no rule formally postponing the deadline. The same looming deadline applies to hedge funds required to register for the first time.

The switch delay is thought to have been driven primarily by Investment Advisor Registration Depository (IARD) programming delays and the logistical issue of collecting asset under management data from all firms in order to qualify them for the switch. Some advisers, out of caution, are registering dually with the SEC and the states so as to cover their bases; they plan on de-registering with the SEC at the appropriate time.

The deadline may be formally moved at the upcoming June 22 SEC meeting, whose agenda identifies consideration of adoptions of new rules and amendments to implement Dodd-Frank; considering Investment Adviser Act exemption rules for venture capital funds and advisers with assets under management of less than $150 million; and considering the proposed rule defining “family offices” that will be excluded from the definition of an investment adviser under the Investment Advisers Act.

Hedge Fund Impact of Dodd-Frank Discussed by Paredes

June 9, 2011 | Steve Parker

Hedge funds will be impacted by the Dodd-Frank Act in numerous ways, some more well-known than others. Some of the better known examples of such impact are the repeal of the private adviser exemption, thus requiring registration for hedge fund managers that do not qualify for other exemptions. Among the exemptions added, of course, is the much-publicized exemption for private funds with less than $150 million in annual assets under management.

Other areas of impact on the hedge fund industry are not as widely discussed. As the SEC Commissioner Troy A. Paredes highlighted in his June 8, 2011 address at The George Washington University Law School, other aspects of Dodd-Frank have less direct, but no less significant, impact on the hedge fund industry.

For example, Dodd-Frank directs the SEC to adopt regulations or guidelines that prohibit incentive-based compensation arrangements that might “encourage inappropriate risks” by financial institutions. This would prohibit investment advisers with $1 billion or more under management from paying excessive compensation that could lead to material financial loss.
Continue reading ›

Performance-Based Fee Threshold Increase Sought by SEC in Proposed Order

May 11, 2011 | Steve Parker

Yesterday the Securities and Exchange Commission published a notice of intent to issue an order that would increase the performance fee threshold, i.e., the definition of “qualified client” under Adviser’s Act Rule 205-3, to $2.0 Million from $1.5 Million (under the client net worth test), and to $1.5 Million from $750,000 (under the client asset under management test). The SEC also notified that it intended to adopt a rule requiring inflation adjustment reevaluation of these thresholds every five years.

The order proposal is a result of a study required by Section 418 of the Dodd-Frank Act. The proposed inflation-adjustment amendment would require the use of the Personal Consumption Expenditures Chain-Type Price Index (“PCE Index”), published by the Department of Commerce. The PCE Index is often used as an indicator of inflation in the personal sector of the U.S. economy.

The proposed amendment to Rule 205-3 would also specify that the value of a prospective client’s personal residence and any debt associated therewith should be excluded in determining net worth for purposes of determining whether he or she is a “qualified client” to whom performance fees may be charged.
Continue reading ›

RIA Switch for Mid-Sized Advisers Delayed by SEC

April 15, 2011 | Steve Parker

According to a recent letter addressed to the North American Securities Administrators Association (NASAA) from Robert Plaze, Associate Director for Regulation of the SEC’s Division of Investment Management, a switch in regulators for advisers who manage between $25 million and $100 million in assets that was supposed to start occurring this summer may now be extended to the first quarter of 2012. The reason is that regulators need until the end of 2011 to reprogram a national registration database for advisers.

Advisers are still waiting for the SEC to adopt the proposed rules that will make the regulatory transition official. The extension of the deadline also must be considered in a rule-making procedure by the SEC.

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.

Georgia Notifies of RIA Switch Deadline Postponement

April 12, 2011 | Steve Parker

According to a Press Release issued today, Georgia Secretary of State Brian Kemp informed investment advisers that Georgia will likely extend the current July 21, 2011 deadline for transitioning mid-sized advisers to state registration. The new deadline will likely be some time in the first quarter of 2011.

According to the Press Release, the SEC has indicated that it will likely extend the date by which investment advisers with between $25 million and $100 million in assets under management must transition to state registration in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Although the provision in the Dodd-Frank Act requiring the change in registration becomes effective July 21, 2011, the SEC’s Division of Investment Management is recommending to the Commissioners that the transition to state regulation be delayed until sometime in the first quarter of 2012.

The SEC notified the North American Securities Administrators Association that once the SEC adopts the implementing rules, the investment adviser online registration system, known as the Investment Adviser Registration Depository system (IARD), will require reprogramming that will take until the end of 2011 to complete.
Continue reading ›

Dodd-Frank’s Impact on Hedge Funds

February 7, 2011 | Steve Parker

Most private fund managers and registered investment advisers who advise funds based in the United States will be affected by the revisions to the Investment Advisers Act of 1940 contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in July 2010. The major impact will be felt by funds, fund managers and advisers in the form of new registration requirements and different, more highly defined, exemptions from registration. Dodd-Frank also mandates increased compliance obligations for those required to register, enhanced record-keeping requirements for both registered and exempt managers and funds, and, in some cases, a requirement to file reports detailing information necessary to assess systemic risks.

The most direct impact of Dodd-Frank is the elimination of the exemption for registration for an investment adviser with “fewer than fifteen” clients. This broad stroke eliminates the basis upon which hedge fund managers have traditionally been exempt from investment adviser registration. In place of the “fewer than fifteen” client exemption, Dodd-Frank carves out exemptions for investment advisers based upon either assets under management or the type of fund advised.
Continue reading ›