Investment advisers must file a Form PF if registered or required to register with the SEC as an investment adviser; or if registered or required to register with the CFTC as a CPO or CTA and also registered or required to register with the SEC as an investment adviser; and manage one or more private funds and; you and your related persons, collectively, had at least $150 million in private fund assets under management as of the last day of your most recently completed fiscal year. The due date for Form PF varies depending on the classification and size of the investment adviser. Many private fund advisers meeting these criteria will be required to complete only Section 1 of Form PF and will need to file only on an annual basis. Large private fund advisers, however, will be required to provide additional data, and large hedge fund advisers and large liquidity fund advisers will need to file every quarter.
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When registering, what type of information will advisers have to provide about the private funds they manage?
November 02, 2018
Advisers to private funds are required to complete Section 7.B. of Form ADV Part 1A. This section has approximately 25 questions designed to require specific information about the fund’s organization and operation structure as well as identification of service providers (i.e. auditors, custodians, etc.) who perform important roles for the fund. In addition, advisers to funds with more than $150 million of assets must file Form PF and the due date for form PF varies depending on the size and classification of the investment adviser.
Are the exemptions mandatory?
November 02, 2018
No, a firm that is exempt from registration can still register (or remain registered) with the SEC if they choose to do so, assuming the firm meets the requirements of Section 203A of the Advisers Act (more than $100 million in assets under management or qualifies for an exception to the prohibition from registering with the SEC). Investment advisers must also consider state registration requirements. A firm that is exempt from SEC registration may not necessarily be exempt from state registration and thus required to register directly with one or more state securities divisions.
Are there any exemptions to the registration requirements?
November 02, 2018
Yes, there are several exemptions to registration requirements but for purposes of this FAQ, we are assuming the private fund adviser is not required to register at the state level and focusing on the three passed in connection with the private fund adviser requirement: (1) venture capital fund advisers, (2) foreign private advisers, and (3) private fund advisers with less than $150 million in assets under management.
When did the new rules become effective?
November 02, 2018
The new rules were effective July 21, 2011. However, firms which are required to register with the SEC had until March 30, 2012 to do so. If your firm was subject to the registration requirements prior to March 30, 2012 and did not register, immediate action must be taken to comply with the registration requirements.
What is considered a private fund for purposes of the Advisers Act?
November 02, 2018
An issuer that would be an investment company as defined in section 3 of the Investment Company Act of 1940 but for section 3(c)(1) or 3(c)(7) of that Act.
Why is the SEC requiring private fund advisers to register?
November 02, 2018
Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) eliminated the private adviser exemption previously available under the Investment Advisers Act of 1940 (“Advisers Act”) and required the SEC to establish Rules requiring advisers to “private funds” to register under the Advisers Act.
Are there any special books and records requirements specifically related to SEC Rule 206(4)-7?
November 02, 2018
A SEC registered investment adviser is required to maintain those records documenting its annual assessment of its supervisory and compliance policies and procedures. Additionally, an SEC registered investment adviser must maintain current copies of its supervisory and compliance policies and procedures as well as any revised supervisory and compliance policies and procedures during the past 5 years.
Once a registered investment adviser has developed written supervisory and compliance policies and procedures, what happens?
November 02, 2018
The first step that should be taken after developing written supervisory and compliance policies and procedures is to provide all employees of the investment adviser with a copy or access to a copy. The investment adviser should require all investment adviser representatives (“IAR”) and employees to review the supervisory and compliance policies and procedures and have each investment adviser representative and employee sign an acknowledgement indicating that he or she has read this compliance manual, understands it and agrees to abide by the investment adviser’s written supervisory and compliance policies and procedures. (Although a signed acknowledgement is not a requirement, it is a good business practice.) A registered investment adviser should provide its investment adviser representatives and employees with on-going training of its supervisory and compliance policies and procedures. An investment adviser must also notify investment adviser representatives and employees when revisions are made to their policies and procedures and should require an acknowledgement on an annual basis.
If a registered investment adviser purchases an off-the-shelf investment adviser compliance manual, will this meet the requirements of SEC Rule 206(4)-7?
November 02, 2018
Off-the-shelf investment adviser compliance manuals are an excellent starting point for a registered investment adviser. However, a registered investment adviser cannot expect to just purchase an off-the-shelf compliance manual and assume that the investment adviser now has sufficient written supervisory and compliance policies and procedures for the investment adviser. These documents are typically written at a very high level to cover many areas that the typical or average investment adviser must consider when developing its own manual customized to its unique business model and circumstances. For a registered investment adviser that is utilizing an off-the-shelf compliance manual, it is imperative that the investment adviser thoroughly review all of the content of the off-the-shelf version of the compliance manual and then revise the compliance manual so that it reflects the actual operation of the investment adviser and meets any unique rules or regulations of the applicable securities regulator(s).
