Compliance Solutions for Investment Advisers

Category Archives: Private Investment Funds

New SEC Final Rule

There is new joint Final Rule entitled: Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds It weighs in at a mere 964 pages. I am going to start reading it now and will post a summary about this time next year. If you want

Venture Capital Guidance Update

On December 2, 2013, the SEC’s Division of Investment Management issued a new “Guidance Update” that provides some important interpretive guidance on the exemption from registration under the Investment Advisers act of 194 for certain venture capital fund advisers (the VC Exemption).  In particular, the Guidance Update clarifies that certain structures and practices common in

New Private Equity Registration Exemption??

The U.S. House of Representatives is expected to vote on legislation that would  exempt certain private equity fund advisers from U.S. Securities and Exchange Commission (“SEC”) registration and reporting rules. The Dodd-Frank Act significantly changed the adviser registration requirements. As a result, many advisers to private investment funds, including private equity funds, must register with

SEC Poised for Massive Audit of Hedge Funds

The U.S. hedge fund industry will be deluged with on-site examinations over the next three years, as the Securities and Exchange Commission broadens its oversight of this sector with a focus on strategy, valuation processes and “side pockets,” a leading securities litigator said on Wednesday. “Hedge funds are far more likely to get an audit

Aggregation of Certain Client Assets in Private Funds

The SEC’s Division of Investment Management said, in a Guidance Update published this week, that it would not object if related investment advisors registered jointly with the SEC and operating a single advisory business aggregate investments made by certain investors for purposes of determining if those investors are “qualified clients.” The question comes up in the context of

What Hedge Funds Spend on Compliance

According to a report just released by KPMG International, the Managed Funds Association and the Alternative Investment Management Associationlobal hedge fund managers are spending more than 7% of their total operating costs and more than 10 basis points (as a percentage of assets under management) on compliance — amounting to $700,000 annually for small firms,

Current SEC Priorities Regarding Hedge Fund Managers

Last week, Norm Champ, the Director of the SEC Division of Investment Management, gave an important and informative speech regarding the SEC and hedge funds. He talks about lifting the ban on general solicitation, that “bad actor” amendment, regulatory initiatives, and insider trading. A link to the article can be found on the SEC’s web

Massachusetts to Fight Reg. D Fraud

Stating that the Securities and Exchange Commission’s newly allowed hedge fund and private equity ad rule “sets in motion a much easier path for shady operators and outright crooks,” Massachusetts Securities regulator William Galvin announced Monday that he’s setting up a new unit to monitor crowdfunding activity in the state. The new unit, to be manned by

IRS Delays FATCA for 6 Months

The IRS announced that the implementation of the Foreign Account Tax Compliance Act (FATCA) generally will be delayed for six months and the FATCA registration portal will open on August 19, 2013.

SEC Lifts General Solicitation Ban on Hedge Funds

Last August, in order to comply with the Congressional mandate to implement Section 201(a)(1) of the JOBS Act, the SEC proposed a rule that would remove the general solicitation ban for certain 506 offerings in which sales of securities would be limited to accredited investors and issuers would be required to take reasonable steps to

As Long As You Disclose It . . .

Further proof that you can do just about anything as long as you disclose it first. Take the recent enforcement action “In the Matter of Ross Mandell (Initial Decision Release No. 478, January 3, 2013)”  The Findings of Fact section has this little gem: “The private placement memorandum (PPM) issued by the company to investors

SEC sifts through Hedge Fund Data to Identify Risk

The Securities and Exchange Commission received disclosure from hundreds of hedge funds and other private money managers detailing their investors, funds, brokers and other information. The SEC is looking through the data in search of risky behavior. “Pick your fraud of the day, and the question is, ‘Can we extract information from this data system

Compliance Alert! Performance Fees

Dear Compliance Professional, Recently the SEC tightened its rule on investment advisory performance fees by raising the net worth requirement for investors who pay performance fees and by excluding the value of the investor’s home from the net worth calculation. This follows on the heels of the SEC excluding the value of an investor’s home

SEC Adopts New Accredited Investor Standard

The SEC finally adopted the long awaited, much-anticipated revised accredited investor standard that requires investors to EXCLUDE the value of their primary residence when calculating their net worth. Investors in private investment funds will have to reach the $1 million net worth level without including the value of their primary residence.

Compliance Alert! Performance Fees

Dear Compliance Professional, Dodd-Frank is certainly keeping us all busy. On July 12, 2011, the SEC issued an order adopting changes to the standard for charging clients a performance fee. Background The Advisers Act generally prohibits an investment adviser from entering into, extending, renewing, or performing any investment advisory contract that provides for performance compensation.

SEC Proposes to Update Investment Adviser Performance Fee Rules

Last week, the SEC proposed adjusting the financial thresholds used to define a “qualified client” for purposes of the performance compensation rules under the Advisers Act, generally raising the net worth test from $1.5 million to $2 million and the assets under management test from $750,000 to $1 million. For the most part, only a

Massachusetts to Regulate Expert-Network Firms

Bloomberg reported this week that the Commonwealth of Massachusetts plans to regulate expert-network firms, the first state in the U.S. to set rules for an industry that was caught up in the federal government’s insider-trading investigation. The proposed regulation will require state-registered investment advisers that pay expert-network firms to obtain written certification that the firms

Hedge Funds Bounce Back

The Wall Street Journal reported this week that hedge funds are bounding back, with investors pumping up the industry to a size not seen since before the financial crisis laid it low. Total hedge-fund assets are approaching $2 trillion and are soon expected to surpass their peak in early 2008, according to industry analysts. Even

Small Hedge Funds Bear Brunt of Dodd Frank

Excellent article in today’s Wall Street Journal about how small hedge fund managers could bear the brunt of regulations spawned by the financial crisis. Registered investment advisers who have struggled with compliance for years are sure to have little sympathy for hedge fund managers that – my God! – now have to appoint a chief compliance