SEC Staff Allows Related Private Fund Advisers to Rely on Single Registration
The staff of the Division of Investment Management has issued a no-action letter allowing private fund managers that operate through multiple entities to rely on a single adviser registration provided certain conditions are observed. The staff acknowledged that private fund advisers often utilize a group of related advisers for a variety of tax, legal and regulatory reasons. The staff indicated that only one adviser of the group needs to register if the group meets several conditions: (i) all of the advisers are under common control; (ii) each adviser has sufficient assets ($150 Million) to register with the SEC (unless
operating from the same location); (iii) the advisers manage only private funds and substantially similar separate accounts for qualified clients; (iv) all persons in the group are deemed "associated persons" and therefore subject to a single Code of Ethics; (v) each adviser is subject to the Advisers Act including a compliance program and SEC examination; and (vi) appropriate disclosure is made on Schedule D of Form ADV for the registering adviser. The staff also indicated that it will still follow prior guidance that a special purpose vehicle formed to serve as a general partner of a private fund need not register if the affiliated investment adviser is registered so long as the GP and its personnel are subject to the Advisers Act.
OUR TAKE: While we don't think the staff's position is a surprise given the staff's prior positions, the conditions imposed may be difficult to satisfy. For example, if one of the relying advisers has less than $150 Million in assets, it may have to register separately with its home state if
it has a separate office location. Also, the conditions may force many firms to change their current structure if they hope to rely on the no-action relief.
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