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PwC alternatives alert, April 15, 2011
SEC States that It May Consider Extending the Compliance Date for Private Fund Adviser Registration under the Dodd-Frank Act
The Securities and Exchange Commission ("SEC") may consider providing additional time for advisers to private equity firms, hedge funds and other private funds to register with the agency as investment advisers. In a letter to the North American Securities Administrators Association, Inc. dated April 8, 2011, Robert E. Plaze, Associate Director of the SEC's Division of Investment Management, stated that while the SEC anticipates that it will complete its rulemaking by July 21, 2011, the agency expects to consider extending additional time for investment advisers to register and to come into compliance with the obligations of a registered adviser under the Investment Advisers Act of 1940 - until the first quarter of 2012.
The Dodd-Frank Act repeals the exemption for private advisers (including advisers for hedge funds, private equity funds and other private funds) and requires those advisers to register with the SEC as advisers. The SEC has proposed rules creating exemptions for advisers to venture capital funds and for advisers to private funds with less than $150 million in assets under management in the United States. Although the letter provided that implementing rules will be adopted in advance of July 21, Plaze also stated that "given the time needed for advisers to register and comply fully into compliance with the obligations applicable to them once they are registered . . . the [SEC] will consider extending the date by which these advisers must register and come into compliance with the obligations of a registered adviser until the first quarter of 2012."
In the letter, Plaze also stated that the SEC will consider extending the deadline for mid-sized advisers (those with assets under management between $25 and $100 million) to transition from SEC to state registration. According to the letter, the SEC may consider providing a grace period to those mid-sized advisers who must withdraw from registration with the SEC and transition to state regulation such that all SEC-registered advisers would be required to report their eligibility for registration in the first quarter of 2012.
The extension of the deadline would apply to both U.S. and foreign advisers.
Advisers to private funds should continue to monitor regulatory developments, and those who will need to register with the SEC should continue to prepare for SEC registration and to assure that they have implemented compliance programs and controls consistent with the obligations of a registered adviser. The SEC has indicated it will adopt final rules sometime between April and July 2011, but has not finalized an exact rulemaking schedule. The extension of time will provide additional opportunity to test, evaluate and refine those controls prior to registration.
