Legal Updates & Alerts

SEC Extends Deadlines for Compliance with New Investment Adviser Registration Regime under Dodd-Frank

July 15, 2011
By Craig Foster

As we detailed in a previous Tonkon Tip, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank") makes significant changes to the current investment adviser regulatory regime. Effective July 21, 2011, Dodd-Frank will, among other things:
  • Eliminate a federal registration exemption commonly relied on by private investment fund advisers with fewer than 15 U.S. clients (each private investment fund is counted as a single "client" under federal rules) if the adviser meets certain criteria. As a result, many such advisers will be required to register with the Securities and Exchange Commission ("SEC") or with the applicable state(s), unless they meet the criteria for one of the new fund adviser exemptions created by Dodd-Frank.  
  • Raise the threshold for SEC registration from $25 million to $100 million in assets under management, with several narrow exceptions. As a result, many SEC-registered advisers will be required to de-register with the SEC and register with the applicable state(s).

On June 22, 2011, the SEC adopted final rules implementing these and other Dodd-Frank changes that provided affected advisers with additional time to meet the new requirements. Specifically:
  • Advisers to private investment funds newly required to register do not have to do so until March 30, 2012.
  • Advisers required to de-register with the SEC and register with the applicable state(s) must complete that transition by June 28, 2012.   

We recommend that advisers affected by these new rules plan to complete the necessary transition to SEC or state registration well in advance of these deadlines to ensure timely compliance.

We will discuss Dodd-Frank's impact on advisers to private investment funds in more detail in a future Tonkon Tip. For further questions concerning investment adviser registration requirements under Dodd-Frank, please contact our Financial Services practice group.