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.
The specific statute provides:
(g) A person shall be exempt from registration as an investment adviser or from making a notice filing required by section 10 of P.L.1967, c.93 (C.49:3-57), if:
(1)The person has a place of business in this State and during any period of 12 consecutive months that person does not have more than five clients, who are residents of this State, other than those specified in subparagraph (vi) of paragraph (2) of subsection (g) of section 2 of P.L.1967, c.93 (C.49:3-49); or
(2)The person has no place of business in this State, and during any period of 12 consecutive months that person does not have more than five clients, who are residents of this State, other than those specified in subparagraph (vi) of paragraph (2) of subsection (g) of section 2 of P.L.1967, c.93 (C.49:3-49).
The bureau chief may by rule or order determine the availability of the exemptions provided by this subsection (g), including the waiver of the conditions in paragraphs (1) and (2) of this subsection;
Please contact us if you have any questions on New Jersey investment advisor registration or if you would like to start a hedge fund in New Jersey. Other helpful hedge fund law articles include: