Banking and Finance

SEC Revamps Investment Adviser Regulatory Scheme as Mandated by the Dodd-Frank Act July 22, 2011

by Cynthia Krus & Michael Koffler

I. Introduction

In response to the Congressional directives contained in Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd Frank Act"), the U.S. Securities and Exchange Commission ("SEC" or "Commission") adopted new rules and rule amendments under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), which:

  • Will require advisers to hedge funds and other private funds to register with the SEC;
  • Establish new exemptions from SEC registration and reporting requirements for certain advisers that are exempt from registration ("exempt reporting advisers"); and
  • Reallocate regulatory responsibility for advisers between the SEC and the states.

In addition, the Commission amended rules and Form ADV to expand the disclosure provided by registered investment advisers and to require certain items of Form ADV to be completed and reported by exempt reporting advisers. Also, the Commission revised its pay-to-play rule to allow advisers to pay compensation to solicitors who are registered as broker-dealers, investment advisers or municipal advisors if certain conditions are satisfied.

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