The Virginia State Corporation Commission (Securities and Retail Franchising Division) yesterday adopted a policy statement providing guidance to advisers to private funds in light of the June 22, 2011 adoption of final rules adopted by the Securities and Exchange Commission. Specifically, the Virginia statement recognizes and addresses the "regulatory gap" created by the SEC Rule 203-1(e), which grants an extension to March 30 2012 for private advisers formerly exempt from registration under Investment Adviser Act Section 203(b)(3), which was repealed by Dodd-Frank, to register with the SEC.
As a consequence of Dodd-Frank, Virginia's Rule 21 VAC 5-80-210A.7, which excludes from the definition of "investment advisers" certain advisers exempt under Section 203(b)(3) of the Investment Adviser Act, becomes a nullity on July 21, 2011. In the absence of the policy statement, the effect of this would be to require private advisers subject to Virginia registration requirements, and that have no other basis for exemption, to register in Virginia as investment advisers by July 22, 2011.
In order to ensure business continuity for existing private advisers, and to facilitate the transition from exempt status to SEC registrant, the policy statement advises that Virginia plans to propose and implement regulations to address the requirement of state registration for these advisers by September 2011. In the interim, it is the policy of the State of Virginia not to require registration for those advisers that (1) have at least $5 million in assets under management; (2) were exempt from SEC registration under former Section 203(b)(3) of the Investment Advisers Act; and (3) are subject to the extension to SEC registration afforded under new Rule 203-1(e).