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4.1 Registration of Advisers to Private Funds

<< Title IV Overview

4.1 Registration of Advisers to Private Funds

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4.1.       Registration of Advisers to Private Funds. Title IV eliminates the 15 client "private adviser exemption" from federal registration under Section 203(b)(3) of the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and creates new exemptions from registration for several categories of investment advisers.  Title IV also modifies the exemptions on which certain private fund advisers relied upon in the past.  Subject to certain exceptions set forth below, the elimination and modification of these exemptions will require many advisers to private funds to register.


Exemptions from registration apply to a variety of advisers to private funds (e.g., banks acting as investment advisers, non-U.S. based advisers meeting certain conditions, advisers to family offices, advisers to venture capital funds, certain advisers to small business investment companies and smaller advisers).  The exact rules governing advisers to family offices, venture capital funds, and smaller advisers are subject to future rulemaking by the SEC.      


4.1.1.    Preservation of Exemption for Banks and BHCs Acting as Investment Advisers.  A bank or BHC, which is not an investment company or an investment adviser to a registered investment company, will remain exempt from registration as an investment adviser (even if they advise private funds) because Title IV continues to exclude them from the definition of "investment adviser" under the Advisers Act.

4.1.2.    Exemption from Registration Applicable to Family Offices.  An adviser to a "family office" is exempted from the definition of "investment adviser" under the Advisers Act and is accordingly exempted from the registration requirements thereunder.  The SEC is to define the term "family office" in a manner (i) that is consistent with the previous exemptive orders granted to family offices; (ii) that recognizes the range of organizational, management and employment structures and arrangements employed by family offices; and (iii) that does not exclude certain advisers to family offices from such exemption solely because they were providing investment advice to certain specified persons prior to January 1, 2010. [§409]