Monthly Archives: December 2010

SEC Extends Compliance Date for “Brochure Supplement,” Part 2B of Form ADV

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On July 21, 2010, the Securities and Exchange Commission (“SEC”) adopted amendments to cheap viagra brand Part 2 of Form ADV that became effective October 12, 2010.  Part 2A of Form ADV, the “firm brochure,” contains information about the advisory firm itself.  Part 2B of Form ADV, the “brochure supplement,” contains information about the advisory personnel.

On December 28, 2010, the SEC issued a four-month extension for the Part 2B compliance dates.   The new compliance dates for Part 2B are as follows:

  • New IAs – All newly registered IAs filing their applications for registration with the SEC from January 1, 2011 through April 30, 2011, have until May 1, 2011 to begin delivering Part 2B to new and prospective clients. These advisers have until July 1, 2011 to deliver Part 2B to existing clients. The compliance dates for delivering Part 2B for newly-registered IAs filing applications for registration after April 30, 2011 remain unchanged.
  • Existing registered IAs – All IAs registered with the SEC as of December 31, 2010, and having a fiscal year ending on December 31, 2010 through April 30, 2011, have until July 31, 2011, to begin delivering Part 2B to new and prospective clients. These advisers have until September 30, 2011 to deliver Part 2B to existing clients. The compliance dates for delivering Part 2B for existing registered IAs with fiscal years ending after April 30, 2011 remain unchanged.

The compliance dates for Part 2A remain unchanged.  More information about the compliance dates initially set by the SEC are available here.

For the full SEC release, please see SEC Extends Compliance Deadline for ADV Part 2.

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Bart Mallon Esq. is a hedge fund attorney and provides hedge fund compliance services through Cole-Frieman & Mallon LLP.  He can be reached directly at 415-868-5345.

New York LLC Publication Requirement

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Fund sponsors who have established a limited liability company in New York to serve as the management company for their hedge fund should be aware of the New York publication requirement.  Pursuant to Section 206 of the New York Limited Liability Company Act, within 120 days after the effective date of the initial articles of organization, a LLC must publish a copy of the articles of organization or a notice related to the formation of the LLC in two newspapers.  After publication, the sponsor will need to submit additional paperwork to the New York Department of Corporations to complete the publication requirement process.  This article provides an overview of the process as well as the consequences for not fulfilling the requirement.

Publication in Newspapers

The notice required under the act must be printed in two different newspapers once each week for six successive weeks.  The sponsor does not choose the newspapers in which the notice will be published; instead, the newspapers are predetermined for the LLC.

The first newspaper will be the same for all LLCs – the New York Law Journal.  [Information on the New York Law Journal to be forthcoming.]

The second newspaper will be different for each LLC.  In order to determine the second newspaper, the fund sponsor will need to contact the county clerk of the county in which the LLC’s office is located (as stated in the articles of organization).  After the county clerk provides the sponsor with the information as to which newspaper to publish the notice, the sponsor will need to contact the newspapers for instruction on the manner in which to cialis in the united kingdom submit the materials for publication.

Submitting the Certificate of Publication

After the publication notices have run for six weeks in the two newspapers, the printer or publisher of each newspaper will provide the sponsor with an affidavit of publication.  The sponosor will then need to submit (1) a Certificate of Publication (2) the affidavits of publication of the newspapers, and (3) a filing fee of $50, to:

Department of State, Division of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, NY 12231

Failure to Satisfy the Publication Requirement

According to the law, if an LLC fails to satisfy this requirement, the LLC will be “suspended” from carrying on, conducting or transacting business in the state.  However, a suspension will not invalidate any contract or act of the LLC or the limited liability of the members.  It is therefore unclear exactly what “suspended” means, as the law and the courts have failed to elaborate.  In the future, the New York legislature or courts could institute more serious repercussions, such as the inability to open bank accounts or enter into certain transactions, but presently, the law explicitly states that a suspension does not invalidate the LLC’s contracts or acts and a suspension can be lifted if the LLC substantially complies with the publication requirement.

More information about the LLC publication requirement is available here and here.

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Bart Mallon, Esq. is a hedge fund attorney and provides hedge fund compliance services through Cole-Frieman & Mallon LLP. He can be reached directly at 415-868-5345.

New BVI Hedge Fund Regulations Start 01/01/2011

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Transition Period for BVI Mutual Funds Act of 1996 Ends on December 31, 2010

Sponsors with funds located in the BVI should be aware that at the beginning of next year there will be a new regulatory regime.  Starting on January 1, 2011, all funds must comply with the requirements of the Securities and Investment Business Act, 2010 (“SIBA”) instead of the current Mutual Funds Act, 1996 (“MFA”).

The new laws are much stricter than the previous laws and continue the push by the BVI Financial Services Commission (FSC) to maintain greater oversight of funds located in the BVI.  Managers with BVI funds should pay careful attention to the new laws and make revisions to their documents or operations accordingly.

Below is an overview of the major new requirements under the SIBA:

  • Disclaimer on Offering Documents – in the event a fund offers interests or shares on or after December 31, 2010, the fund offering documents must be amended to include the prescribed investment warning under the new law.  The subscription agreements must also include an acknowledgement from any new investor that it has received, understood and accepted the investment warning.
    • Note: these documents must be filed with the Financial Services Commission (“Commission”) within 14 days of their issue.
  • 2 Directors viagra canada – all private funds must at all times have at least 2 directors (at least 1 of which is an individual).
    • Note: a change of the board (and auditor) must be filed with the Commission within 14 days.
  • Manager, Administrator, and Custodian – all private funds must have a manager, an administrator, and a custodian which is independent from the manager and administrator.
    • Note:  funds may apply to the Commission from an exemption from the requirement to have a custodian or a manager.
  • Notices
    • Appointing a new custodian, administrator, prime broker, or manager must be reported to the Commission at least 7 days prior to the appointment.
    • Audited accounts must be filed within 6 months of the financial year end.
    • 14 days notice to the Commission is also required for change in place of business and amendments of constitutional or offering documents.
    • Annual returns must be filed by June 30 of each year.

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Bart Mallon, Esq. is a hedge fund attorney and works with a variety of domestic and offshore hedge fund manager.  He can be reached directly at 415-868-5345.

Rule 203(m)-1 – Private Fund Adviser Exemption

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SEC Proposed Rule 203(m)-1 under Investment Advisers Act

The SEC has proposed certain new rules as well as amendments to existing rules under the Investment Advisers Act as a result of the Dodd-Frank Act. New Advisers Act Section 203(m)-1 provides an exemption from registration with the SEC to those groups who only advise one or more qualifying private funds and manages less than $150 million in private fund assets.   The proposed new rule 203(m)-1 essentially exempts smaller fund managers from SEC registration.

Managers should note, however, that they may still be required to either:

  1. Register as an investment adviser pursuant to state law
  2. Become a reporting adviser subject to proposed Rule 204-4

The proposed rule also provides that the exemption is available for managers who are based outside of the United States and manage funds which are domiciled in the U.S. provided that the funds have less than $150 million in assets.

The full proposed rule is reprinted below.

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§ 275.203(m)-1 Private fund adviser exemption.

(a)  United States investment advisers.  For purposes of section 203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its principal office and place of business in the United States is exempt from the requirement to register under section 203 of the Act if the investment adviser:

(1) Acts solely as an investment adviser to one or more qualifying private funds; and

(2) Manages private fund assets of less than $150 million.

(b)  Non-United States investment advisers.  For purposes of section 203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its principal office and place of business outside of the United States is exempt from the requirement to register under section 203 of the Act if:

(1) The investment adviser has no client that is a United States person except for one or more qualifying private funds; and

(2) All assets managed by the investment adviser from a place of business in cheapest perscription for xenical the United States are solely attributable to private fund assets, the total value of which is less than $150 million.

(c)  Calculations.  For purposes of this section, private fund assets are calculated as the total value of such assets as of the end of each calendar quarter.

(d)  Transition rule.  With respect to the calendar quarter period immediately following the calendar quarter end date that the investment adviser ceases to be exempt from registration under section 203(m) of the Act (15 U.S.C. 80b-3(m)) due to having $150 million or more in private fund assets, the Commission will not assert a violation of the requirement to register under section 203 of the Act (15 U.S.C. 80b-3) by an investment adviser that was previously exempt in reliance on section 203(m) of the Act; provided that such investment adviser has complied with all applicable Commission reporting requirements.

(e)  Definitions.  For purposes of this section,

(1)  Assets under management means the regulatory assets under management as determined under Item 5.F of Form ADV (§ 279.1 of this title).

(2)  Place of business has the same meaning as in § 275.222-1(a) of this title.

(3)  Principal office and place of business of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser.

(4)  Private fund assets means the investment adviser’s assets under management attributable to a qualifying private fund.

(5)  Qualifying private fund means any private fund that is not registered under section 8 of the Investment Company Act of 1940 (15 U.S.C 80a-8) and has not elected to be treated as a business development company pursuant to section 54 of that Act (15 U.S.C. 80a-53).

(6)  Related person has the meaning set forth in § 275.204-2(d)(7) of this title.

(7)  United States has the meaning set forth in § 230.902(l) of this title.

(8)  United States person means any person that is a “U.S. person” as defined in § 230.902(k) of this title, except that any discretionary account or similar account that is held for the benefit of a United States person by a dealer or other professional fiduciary is a United States person if the dealer or professional fiduciary is a related person of the investment adviser relying on this section and is not organized, incorporated, or (if an individual) resident in the United States.

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Bart Mallon, Esq. is a hedge fund attorney and works with a variety of managers to hedge funds, private equity funds and venture capital funds.  He can be reached directly at 415-868-5345.

Investment Adviser and IA Representative Registration Renewal

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If your firm is registered as an investment adviser (IA) then you have probably received notice to renew your firm’s registration for 2011.  If you have not received the notice or have not paid the renewal fees, the following provides an overview of the process.

Background

IA firms and IA representatives (RA) should be aware that registrations expire annually on December 31.  In order for an IA firm to maintain their active registrations and/or notice filing statuses and for RAs to maintain active registration statuses, the IA firms must pay applicable renewal fees annually.  The IARD Renewal Program facilitates the annual renewal process.  Generally, a Preliminary Renewal Statement will be made available via the IARD system during the latter half of November.  The Preliminary Renewal Statement will include an amount that must be paid to FINRA by December 13, 2010.  Online payments made via E-Pay should be made by December 9, 2010 in order for the funds to be posted by December 13, 2010.

Submitting Payment

The Preliminary Renewal Statement will be available online generally during the latter half of November.  This year, it was made available on November 15, 2010.  IA firms can access this statement via IARD by following these steps:

  1. Log onto IARD at (https://accountmgmt.finra.org/auth/ews_logon.jsp?CTAuthMode=BASIC&login_form_location_basic).
  2. Enter your firm’s ID and password.
  3. Review and accept the terms and conditions.
  4. Under the “Accounting” tab at the top of the page, select “Renewal Account.”
  5. One the left column, select “Renewal Statement.”
  6. The bottom of the page provides an itemized list of all applicable fees.

Payment by Check

If you choose to submit payment by check, print the statement and mail it, along with the check to the following address:

U.S. Mail:

FINRA
P.O. Box 7777-8705
Philadelphia, PA 19175-8705

(Note: this P.O. Box address will not accept courier or overnight deliveries.)

Express Delivery:

FINRA
8705
Mellon Bank Room 3490
701 Market Street
Philadelphia, PA 19106-1532

(240) 386-4848

The check should be made payable to: FINRA.  Be sure to write your CRD Number and the word “Renewal” on the face of the check.

Payment via CRD/IARD E-Pay

Payment can also be submitted online via CRD/IARD E-Pay.  To do so, follow these instructions:

  1. Go to the E-Pay website.
  2. Enter your login and password.
  3. On the left column under “Payments,” click “Pay my accounts.”
  4. Select the account and click “Continue.”
  5. Enter the total Payment Amount and check “Renewal” under Account Type.  female viagra alternative Then enter the payment method and click “continue.”
  6. Review the information and click “Make Payment.”
  7. Log out and the money should post within about 2 days.

Automatic Daily Account-to-Renewal Account Transfer

If your firms has sufficient funds in the Daily Account to cover the total renewal amount, FINRA will automatically process the renewal payment by the payment deadline.

Other Payment Methods

Wire payments sent by 2 p.m. (ET), should post the next business day.  Wire payments sent after 2  p.m., ET, may take up to 2 business days to post.  Instructions for initiating a wire can be found here.

Confirming Payment

After payment is submitted, you will be able to retrieve your firm’s online Final Renewal Statement on IARD on or after January 3, 2011.  These statements will reflect the final registration status of the IA firm and RAs.  To do so, follow the instructions above to log onto IARD.  Under the “Renewal Statement” link in the “Accounting” section, you can retrieve the Final Renewal Statement, which will state “Paid in Full” or “Amount Due.”  If an amount is due, the balance must be paid by February 4, 2011.

More information about the Renewal Program can be found on the IARD website.  FINRA has also posted a bulletin on the 2011 IARD Renewal Program, available here.

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Bart Mallon, Esq. is a hedge fund attorney and provides investment adviser registration and renewal services through Cole-Frieman & Mallon LLP.  He can be reached directly at 415-868-5345.