SEC Open Meeting, June 22, 2011

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Dodd-Frank Timeline, Rules Implementing Amendments to the Investment Advisers Act of 1940, SEC
Final Rule Issue Effective Date Compliance Date
July 19, 2011 September 19, 2011 March 30, 2012
Dodd-Frank Timeline, Adviser Exemptions, SEC
Comment Deadline Final Rule Issue Effective Date
January 24, 2011 July 6, 2011 July 21, 2011
Dodd-Frank Timeline, Family Office Definition
Comment Deadline Final Rule Issue Effective Date
November 18, 2010 June 29, 2011 August 29, 2011

The U.S. Securities and Exchange Commission (SEC) held a public meeting on June 22, 2011 focused on the adoption of final rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning:

  • SEC registration for advisers to hedge funds and to other private funds;
  • exemptions from SEC registration;
  • reporting requirements for select advisers;
  • regulatory responsibility of the states and of the SEC;[1]and
  • the definition of "family offices" and the definitions' exclusion from the Investment Advisers Act of 1940.[2]

Archived webcast:

Related Documents

Rules Implementing Amendments to the Investment Advisers Act of 1940

  • Advisers to private fund must provide to the SEC:
  1. "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; and
  2. 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)."
  • Under Dodd-Frank, exemptions exist for:
  1. "advisers solely to venture capital funds;
  2. advisers solely to private funds with less than $150 million in assets under management in the U.S.; and
  3. certain foreign advisers without a place of business in the U.S."

Exempt advisers will still be required to file a limited set of information with the SEC.

  • The SEC raised its Commission registration threshold to $100 million and created a new category of advisers called "mid-sized advisers." Advisers who were formerly required to register with the SEC and are now subject to state regulation have until June 28, 2012 to complete the registration transition.
  • Advisers registered with the SEC will be allowed to hire registered municipal advisers for government investment activities, as long as the FINRA and/or MSRB pay-to-play rules are at least as stringent as the investment adviser pay-to-play rule.
  • The SEC created new exemptions for:
  1. "advisers solely to venture capital funds;
  2. advisers solely to private funds with less than $150 million in assets under management in the United States; and
  3. certain foreign advisers without a place of business in the United States."
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Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers with Less Than $150 Million in Assets Under Management, and Foreign Private Advisers

Advisers solely to venture capital funds, solely to private funds with less than $150 million in assets under management in the U.S., or certain foreign advisers without a place of business in the U.S. are able to claim exemption from registration and reporting under the Dodd-Frank Act.

Under the new rule, a "venture capital fund" is defined as a private fund that:

  • "invests primarily in “qualifying investments” (generally, private, operating companies that do not distribute proceeds from debt financings in exchange for the fund’s investment in the company); may invest in a “basket” of non-qualifying investments of up to 20 percent of its committed capital; and may hold certain short-term investments;
  • is not leveraged except for a minimal amount on a short-term basis;
  • does not offer redemption rights to its investors; and
  • represents itself to investors as pursuing a venture capital strategy."

A grandfathering provision is put in place by the SEC for funds that have used venture capital strategy and have made that abundantly clear by the end of 2010. These funds are generally considered to be venture capital funds under the new rule.

A new statutory exemption is put in place by the new rule for private fund advisers with less than $150 million in assets under management in the U.S.

Foreign advisers that do not have a place of business in the U.S. are exempt if they have:

  • "less than $25 million in aggregate assets under management from U.S. clients and private fund investors; and
  • fewer than 15 U.S. clients and private fund investors."

The definition of "foreign private adviser" is also clarified by the SEC in this rule with regard to the exemption statute.

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Family Offices

Under the new rules, companies (otherwise known as family offices) that fit the following parameters will be excluded from Advisers Act regulation:

  • "Provides investment advice only to 'family clients,' as defined by the rule.
  • Is wholly owned by family clients and is exclusively controlled by family members and/or family entities, as defined by the rule.
  • Does not hold itself out to the public as an investment adviser."

Family offices that do not meet the terms of exclusion must register with the SEC under the Advisers Act or with the appropriate state authorities by March 30, 2012. Family offices that are excluded from the definition under the Advisers Act must obtain an SEC exemptive order or register as an investment adviser. The new rules also put a grandfathering provision in place for offices that provide investment advice to certain clients prior to January 1, 2010.

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Chairman Mary L. Schapiro, whose statements include:

  • A summary of the proposals.
  • Explaining the definition of "venture capital fund."
  • "To facilitate an orderly transition and enable private fund advisers to come into compliance with our rules, advisers will not be required to comply with these registration requirements until the first quarter of 2012."

Explaining the definition of "family offices."

Commissioner Kathleen L. Casey, whose statements include:

  • Declining support for the Investment Advisers Act proposal.
  • "I am, however, unable to support adoption of the companion release which sets out the Advisors Act implementation rules because, as I stated when I opposed the release as proposed, I believe that these rules will needlessly harm innovation and capital formation without a demonstrated, articulable, or measurable benefit to investors or financial stability."
  • Support for the exemptions proposal.

Commissioner Luis A. Aguilar, whose statements include:

  • Support for the proposals, and an emphasis on the timely and effective implementation of said rules.

Commissioner Troy A. Paredes, whose statements include:

  • Acknowledging the relief that the final family office rule provides charities or non-profits that rely on family offices.
  • Declining support for the exemptions rule.
  • An outline of the implications facing venture capital funds as a result of the exemptions rule.

Commissioner Elisse B. Walter, whose statements include:

  • General support for the proposals.
  • "Although I appreciate the staff’s recommendation regarding the disclosure items that exempt reporting advisers will be required to complete—and not complete—I would have preferred broader informational requirements, consistent with the legislative determination that these advisers be exempt but reporting. I remain concerned about whether the information these advisers provide will be sufficient to meet our regulatory needs; I continue to believe adamantly that fulsome information is a critical underpinning of sound regulation. Thus, I think that reconsideration is warranted, and strongly support the Chairman’s direction to the staff that we revisit these requirements within one year."
  • Support for the "balanced" definition of "venture capital fund."


  1. SEC Adopts Dodd-Frank Act Amendments to Investment Advisers Act. SEC. Retrieved on June 22, 2011.
  2. SEC Adopts Rule Under Dodd-Frank Act Defining “Family Offices”. SEC. Retrieved on June 22, 2011.

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