Will Some Private Fund Advisers Be Given a Free Pass From SEC Registration?

adviser compliance attorneyTheir may be cases where the Securities and Exchange Commission will grant exemptive relief for private fund advisors that must now register as investment advisers under Dodd-Frank. SEC Commissioner Daniel Gallagher expressed this position in his remarks before the Investment Adviser Association’s recent Investment Adviser Compliance Conference.

“I believe that there will be cases moving forward when an individual advisor or a particular class of advisors ought to be granted some measure of relief from the full panoply of requirements that come with registration under the Advisers Act,” Gallagher said.

However, he did make it clear that his comments did not necessarily represent the positions of the SEC or his fellow Commissioners.

The Commissioner specifically questioned the rationale for imposing the full weight of the SEC registration regime on advisers that do not use leverage as part of their business strategy and market only to sophisticated and institutional investors. He further highlighted the significant costs and burdens that come with SEC registration.

“[H]istorically, the Commission has conserved its resources by allowing the sophisticated clients of such advisers to police the conduct of their advisers privately. But now such advisers must bear the burden of the ongoing compliance costs that come with Commission registration and reporting on Form PF,” Gallagher stated.

“This will impose significant costs and burdens not only on the private advisers, but also on the Commission. And yet, this expansion of our regulatory reach will not serve to protect ordinary retail investors, but rather investors who could, as the Supreme Court so notably said, ‘fend for themselves,’” he continued.

Despite the support for exemptions by the SEC Commissioner, their broad availability is still uncertain. Robert Plaze, deputy director of the SEC’s Division of Investment Management, also spoke at the conference. He stated that he does “not anticipate broad exemptive relief at this point.” Any changes, he said, “would have to be done in Congress.” Stay tuned.

How We Can Help Ensure Compliance

Of course, this post provides only a brief overview of the compliance issues facing private fund advisers in the coming months. Therefore, you should consult with experienced counsel to meet the new rules.

Eckerle Law offers a highest-quality and cost-effective alternative to the traditional law firm model for a wide variety of transactional and regulatory matters serving all your business law needs. Our experienced attorneys also provide a full range of compliance services for investment advisers, offering compliance tools that are tailored to fit the ever changing regulatory landscape as well as your business needs.

If your company would like to strengthen its business practices, please contact us today so we can leverage our experience to create real-life business and legal solutions to help your business thrive.