Dodd-Frank Timeline, Investment Adviser Reporting, Joint SEC-CFTC Rulemaking
| Final Rule Issue
|| Effective Date
|| Compliance Date
| November 16, 2011
|| March 31 2012
|| June 15, 2012*
On June 22, 2011, the SEC finalized rules requiring hedge fund and/or private fund advisers to register with the Commission, establishing stricter reporting guidelines and revising the roles states and the SEC play in regulated said advisers. These amendments affect rules under the Investment Advisers Act of 1940.
Advisers that are required to register for the first time as a result of the new rules are allowed to delay their registration until March 30, 2012. Registration exemptions for venture capital fund advisers and specific private fund advisers go into effect on July 21, 2011.
Required Reporting Information
Under the new registration regulation, advisers to private funds are required to report the following information:
- "Basic organizational and operational information about each fund they manage, such as the type of private fund that it is (e.g., hedge fund, private equity fund, or liquidity fund), general information about the size and ownership of the fund, general fund data, and the adviser's services to the fund;
- Identification of five categories of “gatekeepers” that perform critical roles for advisers and the private funds they manage (i.e., auditors, prime brokers, custodians, administrators and marketers);
- The types of clients they advise, their employees, and their advisory activities; and
- Their business practices that may present significant conflicts of interest (such as the use of affiliated brokers, soft dollar arrangements and compensation for client referrals)."
The following types of advisers will be exempt from registration, effective July 21, 2011:
- "Advisers solely to venture capital funds;
- Advisers solely to private funds with less than $150 million in assets under management in the U.S.; and
- Certain foreign advisers without a place of business in the U.S."
Advisers that fall under the first two categories of exemption may at times be required to report limited information at the SEC's discretion.
Regulatory Responsibility at State and SEC Levels
The final rules create a category of advisers called "mid-sized advisers," defined as advisers that:
- "manage between $25 million and $100 million for its clients;
- are required to be registered in the state where it maintains its principal office and place of business; and
- would be subject to examination by that state, if required to register."
These mid-sized advisers were formerly required to register with the Commission. However, due to Dodd-Frank's raising the registration threshold from $25 million to $100 million, these advisers will now rely on state registration and have until June 28, 2012 to complete the transition.
Under Dodd-Frank, the SEC added another layer of regulation regarding pay-to-play guidelines for the solicitation of advisers as placement agents for government entities. The Municipal Securities Rulemaking Board (MSRB) and the Financial Industry Regulatory Authority (FINRA) have already set guidelines for such actions. The new rules still allow advisers to engage in government or municipal investment activities as long as the pay-to-play rules at the adviser's firm or place of business are at least as stringent as the MSRB and FINRA pay-to-play rules.
The proposal for investment adviser reporting regulation entered the Federal Register on February 11, 2011. The deadline for public comments was April 12, 2011.
- ↑ SEC tightens reins on hedge funds. Washington Post. Retrieved on June 22, 2011.
- ↑ SEC approves tightened rules for hedge funds. Boston Globe. Retrieved on June 22, 2011.
- ↑ U.S. Hedge Fund Registry, FSA Bribe Scrutiny, Emirates Repo:Compliance. Bloomberg. Retrieved on June 23, 2011.
- ↑ SEC approves tightened rules for hedge funds. MarketWatch. Retrieved on June 22, 2011.
- ↑ SEC Adopts Dodd-Frank Act Amendments to Investment Advisers Act. SEC. Retrieved on June 22, 2011.