06 April 2020 - Article
In a letter dated April 8, 2011, Robert Plaze, Associate Director of the Investment Management Division of the US Securities and Exchange Commission (“SEC”), indicated that the SEC expects to consider extending the date by which (1) “mid-sized” advisers must switch from SEC to state registration and (2) advisers currently relying upon the “private adviser” exemption must register under and comply with the Investment Advisers Act of 1940 (“Advisers Act”). Although not specifically cited in the letter, the extension would presumably apply to family offices that currently rely on the “private adviser” exemption but may be required to register as a result of the Dodd-Frank Act.
The requirement for “mid-sized” advisers (advisers with between $25 and $100 million in assets under management) to register with the state in which the adviser maintains its principal place of business and the repeal of the “private fund adviser” exemption (which currently exempts advisers with fewer than 15 clients and allows fund managers to count each fund as a single client) were both contained in the Dodd-Frank Act. The Dodd-Frank Act is scheduled to go into effect on July 21, 2011. Mr. Plaze states in his letter that the SEC expects to have concluded the necessary rulemakings before the July 21, 2011 effective date.
However, citing the need to reprogram the Investment Adviser Registration Depository system, which is not expected to be completed until the end of the year, Mr. Plaze says the SEC expects to consider providing “mid-sized” advisers with a grace period, until the first quarter of 2012, to (i) withdraw from SEC registration, (ii) register with the appropriate states and (iii) come into compliance with state law.
Similarly, citing the time necessary for those currently relying on the “private adviser” exemption to register with the SEC and come into compliance with the obligations applicable to them once they have registered, Mr. Plaze states that the SEC will consider extending the date by which these advisers must register with the SEC and come into compliance with the obligations of a registered adviser until the first quarter of 2012. The announcement that the SEC will consider extending the compliance dates is not yet final or binding. Rather, it is likely that the SEC will adopt final and binding compliance dates by including specific transition periods in its final rules implementing the Dodd-Frank Act.