On January 18, 2012, the staff of the Securities and Exchange Commission ("SEC") released guidance on various issues regarding the status under the Investment Advisers Act of 1940 (the "Advisers Act") of certain private fund general partners and investment advisers that are related to investment advisers that are registered with the SEC.
Registration of General Partner Entities
The SEC staff reconfirmed its earlier position that a special purpose vehicle ("SPV") established by an investment adviser to a private fund to act as general partner or managing member of such fund does not need to register separately as an investment adviser if:
- the investment adviser to a private fund establishes the SPV to act as the private fund's general partner or managing member;
- the SPV's formation documents designate the investment adviser to manage the private fund's assets;
- all of the investment advisory activities of the SPV are subject to the Advisers Act and the rules thereunder, and the SPV is subject to examination by the SEC; and
- the registered adviser subjects the SPV, its employees and persons acting on its behalf to the registered adviser's supervision and control and, therefore, the SPV, all of its employees and the persons acting on its behalf are "persons associated with" the registered adviser (as defined in section 202(a)(17) of the Advisers Act).
The SEC also clarified that (i) this position would apply to advisers with multiple SPVs acting as general partners of funds and (ii) independent directors of an SPV do not need to be subject to the supervision and control of the investment adviser in order for the SPV to rely on the above position.
We note that few arrangements between advisers and general partners will conform to the letter of condition 2. above (as such designation rarely appears in a general partner's formation documents). We believe it is reasonable for an adviser to rely on the guidance above, so long as the designation is made, directly or indirectly, in any fund-related document (including, without limitation, an advisory agreement between the fund and the adviser, an advisory agreement between the general partner and the adviser, or the fund formation documents themselves). We have reached out to the SEC staff for confirmation of this approach.
Multiple Entities in Control Relationships
The SEC staff stated its position that an investment adviser may file a single Form ADV ("filing adviser") on behalf of itself and each other adviser that is controlled by, or under common control with, the filing adviser that is registering through a single registration with the filing adviser (each, a "relying adviser") where the filing adviser and each relying adviser collectively conduct a single advisory business. The SEC staff took the position that, absent other facts suggesting that they conduct different businesses, a filing adviser and one or more relying advisers would collectively conduct a single advisory business for purposes of the letter, and, thus, a single registration would be appropriate, under the following circumstances:
On January 18, 2012, the staff of the Securities and Exchange Commission ("SEC") released guidance on various issues regarding the status under the Investment Advisers Act of 1940 (the "Advisers Act") of certain private fund general partners and investment advisers that are related to investment advisers that are registered with the SEC.
Registration of General Partner Entities
The SEC staff reconfirmed its earlier position that a special purpose vehicle ("SPV") established by an investment adviser to a private fund to act as general partner or managing member of such fund does not need to register separately as an investment adviser if:
- the investment adviser to a private fund establishes the SPV to act as the private fund's general partner or managing member;
- the SPV's formation documents designate the investment adviser to manage the private fund's assets;
- all of the investment advisory activities of the SPV are subject to the Advisers Act and the rules thereunder, and the SPV is subject to examination by the SEC; and
- the registered adviser subjects the SPV, its employees and persons acting on its behalf to the registered adviser's supervision and control and, therefore, the SPV, all of its employees and the persons acting on its behalf are "persons associated with" the registered adviser (as defined in section 202(a)(17) of the Advisers Act).
The SEC also clarified that (i) this position would apply to advisers with multiple SPVs acting as general partners of funds and (ii) independent directors of an SPV do not need to be subject to the supervision and control of the investment adviser in order for the SPV to rely on the above position.
We note that few arrangements between advisers and general partners will conform to the letter of condition 2. above (as such designation rarely appears in a general partner's formation documents). We believe it is reasonable for an adviser to rely on the guidance above, so long as the designation is made, directly or indirectly, in any fund-related document (including, without limitation, an advisory agreement between the fund and the adviser, an advisory agreement between the general partner and the adviser, or the fund formation documents themselves). We have reached out to the SEC staff for confirmation of this approach.
Multiple Entities in Control Relationships
The SEC staff stated its position that an investment adviser may file a single Form ADV ("filing adviser") on behalf of itself and each other adviser that is controlled by, or under common control with, the filing adviser that is registering through a single registration with the filing adviser (each, a "relying adviser") where the filing adviser and each relying adviser collectively conduct a single advisory business. The SEC staff took the position that, absent other facts suggesting that they conduct different businesses, a filing adviser and one or more relying advisers would collectively conduct a single advisory business for purposes of the letter, and, thus, a single registration would be appropriate, under the following circumstances:
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
