22 Jul 2010
Almost two years since the near collapse of the global financial markets, President Barack Obama has signed into law the most sweeping regulatory reform legislation since the great depression – the Dodd-Frank Wall Street Reform and Consumer Protection Act. The most significant effect on investment advisers, who have business in the US or (in certain cases) have even tangential relationships with US investors, is the requirement to register with the US Securities and Exchange Commission.
Kinetic Partners has provided a relevant summary of some of the most important aspects affecting hedge fund and private equity advisers, as well as identifying the key requirements on which advisers must focus when becoming registered.
The amount of AUM and the types of clients or investors served will determine the registration requirements for investment advisers. The basic thresholds are as follows:
- AUM of $150M or greater = registration with the SEC
- AUM of $25M to $150M = registration with the state regulator
Non US investment advisers are exempt from registration if:
- No place of business in US
- Less than $25M of investments from US investors
- Less than 15 US investors
- Adviser does not hold itself out generally to the public in the US as an investment adviser
Other exemptions include venture capital fund advisers, registered commodity trading advisers and family offices (all of which fall within particular specifications).
Transition period
Registration provisions will take effect one year from yesterday's signing by President Obama.
The SEC will have the ability to request information (in addition to records already required) as it deems necessary to protect investors and for the assessment of systemic risk.
Key requirements for SEC Registered Investment Advisers and compliance with the Investment Advisers Act of 1940 (as amended) include:
- Compliance Manual and Code of Ethics tailored to the adviser’s business
- Employee Investment Policies
- Appointment of Chief Compliance Officer
- Compliance monitoring program tailored to the adviser’s business
- Submission of Form ADV I, and preparation of Form ADV II (and Schedule F)
- Books and records retention
- Risk assessment and annual compliance reviews
- Employee training
- Disclosure of conflicts to investors
Although certain details, such as disclosure and reporting requirements, still need to be clarified through implementation by the SEC, it is pertinent that advisers evaluate their firm and prepare for more rigorous SEC oversight. Kinetic Partners can assist advisers in complying with the new registration requirements as well as creating and implementing an efficient compliance infrastructure.
“The expanded authority of the SEC will have a far reaching effect on the alternative investment industry, both in the US and abroad. Not only will most investment advisers now be required to register, they will also be faced with more onerous reporting obligations. Therefore, advisers need to consider how they will respond to the heightened scrutiny and the SEC’s new demands,” says Neil Morris, a Member of Kinetic Partners.
Kinetic Partners has provided a relevant summary of some of the most important aspects affecting hedge fund and private equity advisers, as well as identifying the key requirements on which advisers must focus when becoming registered.
The amount of AUM and the types of clients or investors served will determine the registration requirements for investment advisers. The basic thresholds are as follows:
- AUM of $150M or greater = registration with the SEC
- AUM of $25M to $150M = registration with the state regulator
Non US investment advisers are exempt from registration if:
- No place of business in US
- Less than $25M of investments from US investors
- Less than 15 US investors
- Adviser does not hold itself out generally to the public in the US as an investment adviser
Other exemptions include venture capital fund advisers, registered commodity trading advisers and family offices (all of which fall within particular specifications).
Transition period
Registration provisions will take effect one year from yesterday's signing by President Obama.
The SEC will have the ability to request information (in addition to records already required) as it deems necessary to protect investors and for the assessment of systemic risk.
Key requirements for SEC Registered Investment Advisers and compliance with the Investment Advisers Act of 1940 (as amended) include:
- Compliance Manual and Code of Ethics tailored to the adviser’s business
- Employee Investment Policies
- Appointment of Chief Compliance Officer
- Compliance monitoring program tailored to the adviser’s business
- Submission of Form ADV I, and preparation of Form ADV II (and Schedule F)
- Books and records retention
- Risk assessment and annual compliance reviews
- Employee training
- Disclosure of conflicts to investors
Although certain details, such as disclosure and reporting requirements, still need to be clarified through implementation by the SEC, it is pertinent that advisers evaluate their firm and prepare for more rigorous SEC oversight. Kinetic Partners can assist advisers in complying with the new registration requirements as well as creating and implementing an efficient compliance infrastructure.
