Category Archives: Laws

New Jersey Hedge Fund Law – Investment Advisor Registration Exemption

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New Jersey Hedge Fund Managers Generally Exempt From Registration

Hedge fund managers in New Jersey generally do not need to register as investment advisors with the New Jersey Bureau of Securities.  New Jersey actually has a de minimis rule which provides that managers, with a place of business in New Jersey, do not need to register as investment advisors provided that that have no more than 5 clients (New Jersey) over a 12 month period.

While there is no specific definition of what the term “client” means, the general definition at the federal level and with many states is that a hedge fund counts as a single client and there is no need to “look through” to count the underlying investors in the fund as clients.  Even though this interpretation is generally accepted at both the SEC and state levels, a hedge fund manager may want to request a “no-action” letter from the New Jersey Bureau of Securities.  Such manager should discuss this option with their hedge fund attorney. Continue reading →

South Carolina Hedge Fund Law – Investment Advisor Registration and Form D Filings

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Below we have provided two separate sources from the South Carolina Securities Division Website.  First, we have reproduced a very short blurb from their website which explains that investment advisors who have a place of business in South Carolina must generally be registered as an investment advisor.  Second, we have reproduced their schedule and instructions for the state blue sky filings which need to be made by the hedge fund manager after the first sale of securities in the state.  In general hedge fund interests are sold in accordance with a Regulation D 506 hedge fund offering.  States generally have the authority to require Form D filings when a sale under 506 is made to residents of the state.  In South Carolina the requirement is to make the Form D filing within 15 days of the first sale in South Carolina.  The hedge fund manager will also need to send in a check for $300.  Continue reading →

Georgia Hedge Fund Law – Investment Advisor Registration Exemption

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Georgia Hedge Fund Managers Generally Exempt From Registration

Below we have provided two separate sources from Georgia’s Securities Division Website.  First, we have reproduced their frequently asked questions on investment advisor registration.  Specifically it should be noted that Geogia based hedge fund managers do not generally need to register as investment advisors with the state of Georgia if they only manage one fund.  While managers are not required to be registered, they still will need to make sure that they follow all necessary compliance rules which the hedge fund lawyer can remind them of. Continue reading →

Massachusetts Hedge Fund Law – Investment Advisory Registration Renewals

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Unfortunately for hedge fund managers who are located in Massachusetts, there is generally a requirement to be registered as an investment advisor with the Massachusetts Securities Division.   One of the good things about the Massachusetts Securities Division is that they are generally knowledgeable and the division’s website posts good information for registered investment advisors.  The posts below deal with (1) Massachusetts investment advisor renewals for 2009 and (2) a discussion of the submission requirements for ADV part II through the IARD system.

While these posts are helpful, Massachusetts hedge fund managers are urged to discussion any questions with a hedge fund attorney.  Continue reading →

Exemption From Florida Investment Advisory Registration

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Most states do not have securities laws which provide hedge fund managers with an exemption from investment advisor registration at the state level.  However, Florida does have an exemption which many Florida based hedge fund managers rely upon in order to avoid registration with the Florida Securities Division.

Specifically, Section 517.021(13)(b) of the Florida laws provide that the term “investment adviser” does not include “any person who does not hold herself or himself out to the general public as an investment adviser and has no more than 15 clients within 12 consecutive months in this state.”  Of course the Florida hedge fund manager or prospective manager and the hedge fund attorney should discuss whether the manager’s investment advisory activities will fall within this definition.  Continue reading →

Florida Hedge Fund Law – Investment Advisor Registration Information

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Florida is a very popular jurisdiction for hedge fund formation.  Along with New York, Connecticut, California, and Texas, Florida ranks as one of the most popular hedge fund jurisdictions.  I have included below a description of the investment advisor provisions from the Florida Securities Division website.  One thing to note, as with all Securities Division websites, is that the information below is not the full picture.  For instance, the notice below does not mention a common provision which exempts Florida hedge fund managers from investment advisor registration with the state. Continue reading →

FINRA New Issue Rule 5130 (Text of the Rule)

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As we announced earlier today, the NASD New Issue Rule 2790 has changed and is now FINRA Rule 5130.  The text of the New Issue rule is below and can also be found on the FINRA website here.  With regard to hedge funds, this rule is most important with regard to who will be deemed a “restricted person” and thus generally ineligible to recieve a full allocation of any gains attributable to new issues (commonly known as initial public offerings or IPOs).  The full text of the rule follows.  Continue reading →

Hedge Fund “New Issue” Rule Changes

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Minor Modifications to “New Issues” Rule Approved; New FINRA Rule 5130

FINRA (formerly the NASD) has been reworking a new rulebook which means that many rules have been modified and renumbered.  At least one important hedge fund rule has been renumbered.  The “new issue” rule, which affects hedge funds and other members of the securities community, has been slightly modified and is now known as FINRA Rule 5130 (formerly Rule 2790). Hedge fund managers should discuss with their attorneys whether their hedge fund offering documents need to be updated to reflect this change.  Continue reading →

Colorado Hedge Fund Law – Colorado Investment Advisor Privacy Rules

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Application of the Gramm-Leach-Bliley Act to Colorado Registered Investment Advisors

A common question for state registered investment advisors is regarding their responsibilities for maintaining the privacy of their hedge fund investors.  Many state securities divisions provide notice on their website regarding the applicability of the Gramm-Leach-Bliley Act to the manager’s investment advisory activities.  The Colorado Securities Division, which has a savvy and knowledgeable staff, has provided Colorado investment advisers with an overview of their responsibilities with regard to “non-public personal information.”  In general most hedge funds do not have a need to disclose the “non-public personal information” of their investors to outside parties, but if a hedge fund manager does need to disclose such information to third parties, then the manager should discuss this in greater detail with his hedge fund attorney.

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Oregon Hedge Funds – Investment Advisor Issues

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Questions and Answers on Oregon Investment Advisor Registration For Hedge Funds

Some states will provide a good source of information to start up hedge fund managers which details whether the hedge fund manager will need to register as an investment adviser in the state of residence.  The following resource is from the Oregon Division of Finance and Corporate Securities and answers common questions that potential Oregon hedge fund managers would have regarding the Oregon investment advisor registration requirements.

Specifically this set of questions and answers shows us that there is no de minimis rule which would allow managers to escape investment advisor registration in Oregon; the Q&A also details the notice filing requirements in Oregon.  Even though SEC registered investment advisors will not need to register with the state securities division, the firm will need to “notice file” and pay a filing fee and investment advisor representatives of the firm will usually need to have the Series 65 and the investment advisory firm will need to pay a filing fee for the representative.  Continue reading →