SEC Adopts Rules Under the Dodd-Frank Act Implementing Amendments to the Investment Advisers Act and Extends Deadline for Compliance: New Rules and Forms Will Implement the Dodd-Frank Act’s Registration Requirements for: Advisers to Private Funds; Mid-Sized Advisers; Exemptions for Advisers to Venture Capital Funds, Certain Private Fund Advisers and Foreign Private Advisers; the New Exclusion for Family Offices; and Reporting Requirements for Registered Advisers...

Sullivan & Cromwell LLP - June 30, 2011

On June 22, 2011, the Securities and Exchange Commission (the “SEC”) adopted final rules to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) regarding investment advisers, especially advisers to private funds, such as hedge funds and private equity funds. Together, the Dodd-Frank Act provisions, which come into effect as of July 21, 2011, and the SEC’s final rules will:

  • require advisers to hedge funds and other private funds who have previously been exempt from SEC registration under the “private adviser exemption” to register with the SEC by March 30, 2012, or with the states, unless they fall within one of the new Dodd-Frank Act exemptions;
  • reallocate regulatory oversight authority for mid-sized advisers between the SEC and the states, as required by the Dodd-Frank Act;
  • establish a uniform method for advisers to calculate their assets under management (“AUM”) for regulatory purposes in order to determine registration requirements and exemptions;
  • implement three exemptions from SEC registration created by the Dodd-Frank Act for advisers to venture capital funds, advisers to private funds with less than $150 million in aggregate AUM in the U.S., and certain foreign private advisers;
  • establish expanded reporting requirements for registered advisers and new reporting requirements for certain unregistered advisers relying upon the venture capital fund adviser and private fund adviser exemptions under the Dodd-Frank Act;
  • amend and expand Form ADV to accommodate use by both registered advisers and unregistered exempt reporting advisers and reflect the additional reporting, categorization, and disclosure requirements required by the Dodd-Frank Act; and
  • define “family offices” to be excluded from the definition of “investment adviser” under the Investment Advisers Act of 1940 (the “Advisers Act”).

The new exemptions from registration and the transitional rules that extend compliance deadlines for registration will become effective on July 21, 2011. The SEC’s final rules defining family offices will become effective August 29, 2011. The implementing amendments to the Advisers Act will become effective 60 days after publication in the Federal Register. However, the SEC has provided additional time for advisers to come into compliance with the new requirements.

Advisers who will become subject to registration under the new rules must be registered no later than March 30, 2012, and the SEC has indicated that applications for such registration should be filed no later than February 14, 2012. Advisers currently registered with the SEC must declare whether they are permitted to remain federally registered in their Form ADV filing by March 30, 2012, and those no longer eligible for SEC registration will have until June 28, 2012 to complete the switch to state registration.