Articles Tagged with Private Fund Adviser Exemption

Delaware has adopted a rule exempting “private fund advisers” from the state’s unlawful conduct provision, including the provision requiring registration as an investment adviser. Under the new rule, a private fund adviser is exempt from Delaware Securities Act unlawful conduct provisions if: (1) neither the private fund adviser nor any advisory affiliates are subject to an event that would disqualify an issuer under federal Regulation D, Rule 506(d)(1); (2) the private fund adviser files with the Director through the IARD each report and amendment that an exempt reporting adviser is required to filed with the SEC under SEC Rule 204-4; and (3) the private fund adviser pays the investment adviser registration fee of $300.

A “private fund adviser” is defined as “an investment adviser who provides advice solely to one or more qualifying private funds, other than a private fund that qualifies for the section (3)(c)(1) investment company act exclusion.” A “qualifying private fund” is a private fund meeting the SEC rule 203(m)-1 “qualifying private fund” definition.
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Rhode Island has substantially adopted its proposed private fund adviser exemption, which we previously discussed in a posting dated April 10, 2012. The new rule became effective on May 17, 2012. To qualify for the exemption, the adviser must advise only private funds as defined under SEC Rule 203(m)-1. Furthermore, if it advises non venture capital 3(c)(1) funds, for each such fund:

  • The fund’s beneficial owners must meet the definition of a “qualified client” as defined in SEC Rule 205-3 after deducting the value of the primary residence;
  • The private fund adviser has to disclose the following information in writing to each beneficial owner: (1) all service, if any, to be provided to beneficial owners, (2) all duties owed to beneficial owners, and (3) any other material information affecting the rights or responsibilities of the beneficial owners; and
  • The adviser, on an annual basis, must obtain audited financial statements of each fund and provide a copy to the beneficial owner.

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