Client Alert – Reporting Requirements for Investment Advisers

As a private investment adviser grows, it is important to be mindful of certain thresholds requiring submission of filings to the SEC or state securities regulators. Investment advisers generally include persons engaged in the business of advising others in the purchase and sale of securities, including fund managers and GPs.

While the summary below generally describes some registration and reporting requirements and applicable exemptions, it is not intended to be exhaustive. The landscape of federal and state registration and reporting requirements is quite complex, and investment advisers should check with their legal counsel to determine any applicable requirements.

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Form ADV

As a general rule, most US investment advisers must file a Form ADV to register with the SEC unless an exemption applies. Form ADV is quite extensive and requires detailed information on the investment adviser’s business. Once filed this form may be required to be updated at least annually.

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Exempt Reporting Advisers (ERAs)

Most managers of VC funds qualify as ERAs, and therefore may qualify to file some parts of Form ADV. VC funds may qualify as ERAs under one of the following exemptions:

1. The Private Fund Adviser Exemption: Applies to U.S.-based investment advisers that manage only private funds and have less than $150 million in assets under management (AUM).
2. The Venture Capital Adviser Exemption: Applies to certain investment advisers that advise only VC funds. To qualify for this exemption, the funds being advised must have a minimum of 80% of their committed capital be in liquid short-term holdings or “qualifying investments” in private companies, among other requirements, including limitations on debt and redemption rights of LPs. Because the requirements for this exemption can be quite technical, funds should verify with legal counsel whether they will qualify.

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Small Advisers – Under $25 million in AUM

A “small adviser” has less than $25 million in AUM. Small advisers may not have to file with the SEC, depending on the number of clients they advise and their place of business or if they offer their services exclusively through an interactive operational website or not. Small advisers may be subject to state reporting requirements.

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Mid-Sized Advisers - $25 million to $100 million in AUM

Mid-sized advisers that are ERAs must file a truncated Form ADV with the SEC and comply with applicable state reporting requirements. Mid-sized advisers that are not ERAs must register with the SEC or a state regulator.

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Foreign Private Advisers

Investment advisers qualifying for the Foreign Private Adviser Exemption are exempt from filing Form ADV. To qualify for this exemption, an investment adviser must:

1. not have a place of business in the United States;
2. have fewer than 15 clients in the United States and investors in the United States in private funds advised by the investment adviser;
3. have aggregate AUM attributable to U.S. clients and investors of less than $25 million; and
4. generally not hold itself out to the public in the United States as an investment adviser.

The above summary is for informational purposes only and is not intended to serve as legal advice. Other requirements may apply to you of the fund itself, including under the Securities Act of 1933, as amended, and the Investment Companies Act of 1940, as amended, and their regulations. You should consult your PAG Law attorney or your counsel to determine which legal requirements apply to your business.