This is the first post in a series exploring
the recent SEC regulations which define the term "venture capital fund" for the
purposes of determining whether a fund's manager is exempt from SEC
registration requirements under Dodd-Frank.
The Dodd-Frank Act excluded from its registration
requirements those private fund managers who exclusively manage venture capital
funds. However, Congress left it up to the SEC to define the term
"venture capital fund." In June, the SEC issued a final
rule which provides a definition for the term. Here is a brief
overview of the requirements that a fund must meet, under SEC Rule 203(l)-1(a),
in order for it to qualify as a "venture capital fund":
As you can see, these requirement will impose significant
restrictions going forward on the activities of VC funds if they want to
maintain an exemption from registration under the Investment Advisers Act.
Luckily many existing VC funds that have completed their capital raises
are grandfathered under SEC Rule 203(l)-1(b).
This description is meant to be a broad overview of the
topic. Future posts will describe each of these provisions and discuss
their implications in detail. Stay tuned.
 A fund manager who is exempt under the venture
capital exemption is
still an exempt-reporting adviser, which means it will still be required to
provide an abbreviated Form ADV to the SEC. In addition, fund managers
exempt from the SEC may
also still nonetheless be subject to state registration requirements.
Read more articles by Alexander Davie at Strictly Business, a
business law blog for entrepreneurs, emerging companies, and the investment
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