California Proposes Private Fund Manager Exemption From IA Registration

Simon Riveles Dodd-Frank, Uncategorized

California has proposed a new exemption for registration of investment adviser to private funds meant to replace the interim regulations implemented as a stop gap measure by the State after the passage of Dodd-Frank on July 11, 2011. If adopted, the proposed rule would become effective sometime during the first half of 2012, and provide an exemption to a manager who:

  • advises one or more private funds (namely a 3(c)(1) or 3(c)(7) fund);
  • has not been subject to certain disciplinary actions relating to violation of the securities laws;
  • pays the State’s registration and renewal fees ($125);
  • only accepts “accredited investors” and only charges a performance fee to “qualified clients”;
  • provides investors certain written disclosures about the services it provides, its duties, and other material information;
  • obtains an annual independent audit of each private fund it manages and delivers such audit to each investor; and
  • advisers must file each report required to be filed by an exempt reporting adviser pursuant to Rule 204-4 under the Investment Advisers Act of 1940, as amended.

Text of the proposed rule change can be found here: Proposed Changes Investment Adviser Registration_California

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