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With a registration deadline of March 30, 2012 and a 45 day period for
the SEC to review the application, private fund managers need to file their
Form ADV by
February 14. I know that there are fund managers still on the fence on whether
to register or not.
The trouble came from Title IV of Dodd-Frank using the
new term "private fund" instead of merely removing the 15 client rule
exemption. The private fund definition involves parsing the definitions and
exemptions under the Investment Company Act. That puts fund managers into the
first week of securities law class having a discussion on "what
is a security?" That may be an interesting intellectual discussion, but not
one for a business owner trying stay in compliance with the law.
You add on top of that the new exemption for "venture
capital fund", leaving VCs scratching their heads on whether they are a
venture capital fund manager or not?
The big unknown is the expectation of the limited
partner. In the past, limited partners have accepted the fact that fund
managers were not registered with the SEC. That was the nature of the industry.
After March 30, many (most?) private fund managers will be registered. How many
potential investors will throw your proposal in the trash because you can't
check the "registered with the SEC" box?
The decision time is here. To register or not register?
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.
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