Just to keep you on your toes if you have less than $150
million under management, states are now filling in the gaps left by
Dodd-Frank. If you are under that threshold, you lose the ability to register
with SEC and now have to look to at being regulated at the state level.
Massachusetts used to have a very broad exemption if your
clients were all "institutional buyers."
An investing entity whose only investors are accredited
investors as defined in Rule 501(a) under the Securities Act of 1933 (17 CFR
230.501(a)) each of whom has invested a minimum of $50,000.
For a private fund manager, this was a great exemption
since their investors would need to be accredited investors. As long they kept
capital commitments at a minimum of $50, 000 they could usually take advantage
of this exemption.
The Massachusetts Secretary of State has proposed
removing this exemption as well as cleaning up other aspects of investment
adviser/fund manager regulation to get ready for Dodd-Frank.
The proposal would also create new Massachusetts
registration exemptions for advisers whose only clients are "venture capital
funds" or funds excluded from the definition of "investment company" under
Section 3(c)(7) of the Investment Company Act. As you might expect, the term
"venture capital fund" would be defined by reference to the SEC's definition of
the term. The SEC
has proposed a draft definition of venture capital fund, but not yet
What is abundantly clear is that the SEC has run out of
time it trying to meet the July 21, 2011 deadline in Dodd-Frank. It's time to
raise the white flag and move the deadline. Since the SEC has not yet finalized
the rules, regulated parties would have no time to understand the rules and get
changes in place by July 21. Given that thousands of advisers are being kicked
out of SC registration and over to state registration, the states do not have
the rules in place to deal with the regulatory changes.
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.
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