New York (HedgeCo.net) – Certain highlights of Title IV of the the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), “Regulation of Advisers to Hedge Funds and Others,” are listed below:

Elimination of Private Adviser Registration Exemption

Previously, private investment advisers with fewer than fifteen clients during the preceding year were generally exempt form SEC registration. The Act has eliminated this exemption.

Registration

Investment advisers that manage private funds with over $25 million in assets under management will be required to register with certain exceptions.

Exceptions:

• A “mid-sized investment adviser” with assets under management between $25 million and $100 million will be required to be registered and be inspected in the state in which it maintains its principal office and place of business. Such exception does not apply to managers of registered investment companies, business development companies and advisers required to register in 15 or more states.

• “Advisers solely to Venture Capital Funds,” to be defined by the SEC.

• Advisers that act solely as an adviser to “private funds” (hedge funds and private equity funds generally meet the definition of “private funds”) and have total assets under management in the U.S. of less than $150 million. Separately managed accounts generally do not meet the definition of “private funds” and therefore do not qualify for this exemption.

• “Foreign Private Advisers” meeting all of the following conditions:

– No place of business in the U.S.
– Fewer than 15 U.S. clients or investors
– Less than $25 million in assets under management (or lesser amount to be determined by the SEC) attributable to U.S. clients or investors; and does not hold itself out to the public in the U.S. as an adviser or advise a U.S. registered investment company or business development company

• Family Offices, to be defined by the SEC, are excluded from the definition of investment advisers. Family Offices typically provide investment management and other services to members of a single family as well as certain employees.

• Registered Commodity Trading Adviser that:

– (i) is registered as a commodity trading adviser with the CFTC and
– (ii) advises a private fund, provided that the adviser’s business is not predominantly
securities-related advice.

Expanded Recordkeeping and Reporting Requirements

The Act has expanded the recordkeeping and reporting requirements for both registered and non-registered investment advisers. For each “private fund” advised, these requirements include a description of:

– Amount of assets under management and use of leverage, including off-balance sheet leverage
– Counterparty credit risk exposure
– Trading and investment positions
– Valuation policies and practices
– Types of assets held
– Side arrangements or side letters
– Trading practices
– Other information that the SEC deems necessary and appropriate

Adjustment of Accredited Investor Standard

The Act sets the net worth threshold for an accredited investor at $1 million. This threshold applies either individually or jointly and excludes the values of the primary residence of that person. The Act grants the SEC the right to periodically review and adjust this net worth threshold.

If you wish to discuss financial implications or related aspects of these provisions, please contact Craig Goodman or another EisnerAmper LLP professional. In addition, you are strongly urged to consult qualified legal and other professional advisers to learn the full impact of the Act.

Editing by Alex Akesson