As many know, the SEC has issued rules which define which venture capital advisers will not have to register as investment advisers with the SEC.  In addition, the SEC has issued rules which exempt many hedge fund managers and private equity groups with assets under management of less than $150 million from registration as an investment adviser. It is important to note however, that under final rules issued by the SEC, these “exempt reporting advisers” to venture capital funds, hedge funds and private equity groups will still have to file Form ADV with the SEC which will be publicly available.

Reporting Requirements

Rule 204-4 requires exempt reporting advisers to file reports with the Commission electronically on Form ADV through the IARD using the same process used by registered investment advisers.  The IARD system is maintained by FINRA on behalf of the SEC.  Exempt advisers will have to report a subset of information that registered advisers must report.

An exempt reporting adviser must submit its initial Form ADV within 60 days of relying on the exemption from registration afforded venture capital advisers or advisers to private funds with less than $150 million in assets under management.  Each Form ADV is considered filed with the SEC upon acceptance by the IARD.  Under the transition provisions of the new rules, exempt reporting advisers must file their first reports on Form ADV through IARD between January 1 and March 30, 2012.

The SEC anticipates that filing fees, which the SEC will consider separately, will be the same as those for registered investment advisers, which currently range from $40 to $225 based on the amount of assets an adviser has under management.

Rule 204-1 requires an exempt reporting adviser, like a registered adviser, to amend its reports on Form ADV: (i) at least annually, within 90 days of the end of the adviser‘s fiscal year; and (ii) more frequently, if required by the instructions to Form ADV. General Instruction 4 to Form ADV requires an exempt reporting adviser, like a registered adviser, to update promptly Items 1 (Identification Information), 3 (Form of Organization), and 11 (Disciplinary Information) if they become inaccurate in any way, and to update Item 10 (Control Persons) if it becomes materially inaccurate.

Content of Information to be Disclosed

Exempt reporting advisers will be required to complete the following items of Part 1A of Form ADV:

• 1 – Identifying Information
• 2.B. – SEC Reporting by Exempt Reporting Advisers
• 3 – Form of Organization
• 6 – Other Business Activities
• 7 – Financial Industry Affiliations and Private Fund Reporting
• 10 – Control Persons, and
• 11 – Disclosure Information

In addition, the SEC requires that exempt reporting advisers also complete corresponding sections of Schedules A, B, C, and D to Form ADV.

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