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First Quarter 2013 Business & Regulatory Update

Below is the first quarter update we have sent out to our mailing list.  If you would like to be added to the mailing list, please contact us here.


Cole-Frieman & Mallon First Quarter Update

Clients and Friends:

The early months of 2013 have been a busy time in the world of investment management regulatory compliance.  As we head into the second quarter, we take this opportunity to provide you with a brief overview of some items that we hope will help you stay on top of the business and regulatory landscape in the coming months.


Form ADV Annual Updating Amendment was due on March 31.  All registered investment advisers or managers filing as exempt reporting advisers with the SEC or a state securities authority must file an annual amendment to Form ADV within 90 days of the end of their fiscal year. For most advisers, this deadline passed on March 31, 2013. Registered investment advisers or exempt reporting advisers who have not filed their annual update should attend to the filing as soon as possible.

Foreign Account Tax Compliance Act (“FATCA”) Regulations Issued. The long-awaited FATCA regulations have been issued, and the timelines for fund compliance have been set. The regulations require certain financial institutions to either (i) identify and disclose direct and indirect U.S. investors and withhold U.S. income tax on nonresident aliens and foreign corporations, or (ii) be subject to a 30% FATCA tax.  Foreign financial institutions (“FFIs”), which include hedge funds, funds of funds, commodity pools and other offshore investment vehicles, will be required to enter into agreements with the IRS by January 1, 2014 to avoid being subject to the FATCA tax. The IRS’s online registration portal will be available by July 15, 2013, and offshore funds and other FFIs must be registered by October 25, 2013 to be included on the IRS’s first list of FATCA compliant FFIs, which will be published on December 2, 2013. Managers should also consider updating their fund documents to include FATCA disclosures and representations.

Electronic Schedule K-1s. The IRS has authorized partnerships and limited liability companies taxed as partnerships to use exclusively electronic means to distribute Schedule K-1s to investors, as long as the partnership first obtains the investor’s affirmative consent. Partnerships must obtain consent in a manner that demonstrates that investors can access the electronic format in which the K-1 is furnished. States may have different rules regarding electronic K-1s, so funds should check with their counsel or service providers whether they may still be required to send state K-1s on paper. Partnerships must also provide each investor with specific disclosures that include a description of the hardware and software necessary to access the electronic K-1s, how long the consent is effective and the procedures for withdrawing the consent.

SEC Update.  The SEC has been extremely busy over the last quarter. The biggest news is the Obama administration’s nomination of Mary Jo White as the SEC’s new chairman. White, a former U.S. attorney in Manhattan, will be the first prosecutor to head the SEC, and her nomination signals the administration’s resolve to hold Wall Street accountable for any wrongdoings.  Other SEC related items include:

  • JOBS Act.  One purpose of the Jumpstart Our Business Startups Act (the “JOBS Act”) was to reduce the regulatory restrictions around the general solicitation and advertising of private securities offerings.  However, a year has passed since the bill was signed into law, and the SEC still has not promulgated rules to implement the JOBS Act. Absent guidance from the SEC, we caution fund managers against relying on the JOBS Act to engage in general solicitation and advertising of interests in their funds.
  • SEC Presence Exams.  The SEC’s two-year “Presence Exam” initiative is currently underway.  The initiative, which aims to examine the conduct of most newly registered investment advisers, gives the SEC the ability to reach a large percentage of new registrants by focusing on a limited number of higher risk issues, including: (i) marketing, (ii) portfolio management, (iii) conflicts of interest, (iv) safety of client assets and (v) valuation.  Most newly registered managers should expect to be examined within the next two years.  Information about Presence Exams can be found here.
  • Common Adviser Custody Rule Deficiencies.  The SEC recently released a risk alert that addresses the common deficiencies related to Rule 206(4)-2 under the Investment Advisers Act of 1940, known as the “Custody Rule”. The risk alert identifies four primary categories of deficiencies: (i) failure by an adviser to recognize situations in which it has custody under the Custody Rule; (ii) failure to meet the Custody Rule’s surprise examination requirements; (iii) failure to satisfy certain “qualified custodian” requirements under the Custody Rule; and (iv) failure to properly engage independent auditors or otherwise comply with the requirements for audits of pooled investment vehicles under the Custody Rule.  Managers should carefully review the requirements of the Custody Rule and make sure that the deficiencies highlighted by the risk alert do not apply to their firms.  The risk alert can be found here.
  • Form PF. While advisers with at least $1.5 billion assets under management were required to file their initial Form PFs by March 1, 2013, most other advisers are required to file an initial Form PF by April 30, 2013. Compiling the information necessary to prepare the Form PF is burdensome and may take substantial time and effort.  If you are looking for last-minute assistance with any aspects of the filing, please do not hesitate to contact us or your service providers.

Futures and Derivatives. Like the SEC, futures and derivatives regulators and self-regulatory organizations have been very busy over the last quarter.  Important developments include:

  • ISDA August 2012 Dodd-Frank Protocol. The International Swaps and Derivatives Association’s Dodd-Frank Documentation Initiative aims to facilitate compliance with the Dodd-Frank Act. The Documentation Initiative minimizes the need for bilateral negotiations and reduces disruptions to trading by providing a standard set of amendments, referred to as protocols, to update existing swap documentation. The D-F Protocol is the first of such protocols, and it facilitates industry compliance with seven final rulemakings.  Because certain final rules have an effective compliance date of May 1, 2013, managers whose portfolios include swaps and who have existing relationships with swap dealers should adhere to the D-F Protocol as soon as possible to give swap dealers ample time to integrate information provided through the protocol.  To indicate their participation in the protocol arrangement, market participants must submit an adherence letter and pay an adherence fee of $500.00 through the online ISDA Amend system.  Detailed instructions on the submission of the Adherence Letter through ISDA Amend can be found here.
  • Swap Data Reporting and Recordkeeping. Swap dealers registered with the CFTC are obligated to report all swaps to which they are a party.  Under new CFTC rules, investment funds that are U.S. persons may need to report swaps when trading with (i) other financial entities that are not swap dealers, (ii) non-financial entities or (iii) non-U.S. swap dealers.  The new rules require that all swap counterparties keep detailed records of their swaps for the life of the swap and for five years following its termination. All investment funds who intend to transact in swaps must obtain a CFTC Interim Compliant Identifier (“CICI”) by April 10, 2013.  Investment funds may obtain CICIs here.
  • ERISA Relief for Cleared Swap Transactions.   The U.S. Department of Labor recently issued an advisory opinion addressing the application of the Employee Retirement Income Security Act of 1974 (“ERISA”) to certain “cleared swap” transactions conducted pursuant to provisions of the Dodd-Frank Act.  The advisory opinion clarifies the ERISA fiduciary status of futures commission merchants and clearing organizations that perform swap transactions on behalf of ERISA plans.  It alleviates the concern that fiduciary obstacles could keep ERISA plans out of the swap market.  The full text of the opinion is available here.
  • CFTC CTA and CPO Reporting Deadlines.  All CTAs that were required to be registered on or before December 31, 2012, had to file a Form CTA-PR annual report with the NFA by February 14, 2013.  Each CPO that was required to be registered on or before December 31, 2012, was required to complete and file applicable schedules of CFTC Form CPO-PQR by March 31, 2013.  NFA Rule 2-46 requires each CPO member to file Form CPO-PQR on a quarterly basis.  If you are a CPO or CTA and have not met these obligations and would like our assistance with the filings, please do not hesitate to contact us.

Other Notes.

  • European Union’s Alternative Investment Fund Managers Directive (“AIFMD”).  Starting July 22, 2013, in order to continue marketing to EU investors, non-EU managers will be required to comply with reporting and disclosure obligations under the AIFMD for each fund that is marketed in one or more EU jurisdictions. These obligations consist of providing pre-investment and ongoing disclosures to investors, and annual and regular reports to an EU national regulator.  If you are marketing to EU investors, you should carefully review the directive’s provisions to make sure you comply with its requirements.
  • California LLC Penalties for Unregistered Companies.  The California Franchise Tax Board recently announced that it will assess a $2,000 penalty on unregistered limited liability companies that are conducting business in California. Advisers doing business in California should make sure that they have filed the necessary registration paperwork, and should remain current with all their tax payments. Advisers registered outside of California that do business within the state must make sure to file the required California Statement of Information, which must be renewed every two years. Many taxpayers are unaware that they are “doing business” in California. If you are unsure whether or not you are doing business in California you should consult your legal adviser or service provider. The Tax Board’s release can be found here.

Compliance Calendar.  As you plan your regulatory compliance timeline for the coming months, please keep the following dates in mind:

Deadline Filing
March 31, 2013 Form ADV annual updating amendment deadline
April 10, 2013 CFTC Interim Compliant Identifier deadline for all funds who intend to transact in swaps
April 30, 2013 Form PF deadline for smaller SEC registered private fund advisers
May 1, 2013 D-F Protocol adherence deadline
Variable Distribute annual audited financial statements and copies of Schedule K-1 to fund investors
Periodic Filings Form D and Blue Sky filings should be current

Please contact us with any questions or for assistance with any compliance, registration or planning issues on any of the above topics,


Karl Cole-Frieman & Bart Mallon


Cole-Frieman & Mallon LLP is a premier boutique investment management law firm, providing top-tier, responsive and cost-effective legal solutions for financial services matters.

Hedge Fund Compliance & Due Diligence Webinar

Bart Mallon Speaker at Hedge Fund Compliance and Due Diligence Webinar

Due diligence continues to be a hot topic for fund managers; compliance has been a central issue for managers ever since SEC registration was required for those managers with more than $150M of AUM. Below is a release for webinar which will be taking place later this month. Bart Mallon will be speaking about the legal issues involved with compliance and due diligence.

Registration is free and sign up is here.


Corgentum Consulting Hosts Hedge Fund Operational Due Diligence Webinar on Compliance and Legal Risk

Corgentum Consulting will host a complimentary Webinar titled, ‘Techniques for Analyzing Hedge Fund Compliance and Legal Risks During Operational Due Diligence’ on October 23, 2012, at 10:30am EDT

NEW YORK – Oct. 1, 2012 – Corgentum Consulting, the leading provider of the industry’s most comprehensive hedge fund operational due diligence reviews, will host a complimentary Webinar titled, “Techniques for Analyzing Hedge Fund Compliance and Legal Risks During Operational Due Diligence” on October 23, 2012, at 10:30am EDT. Join the speakers as they examine the effective techniques for evaluating a fund’s legal and compliance risks.

The global hedge fund regulatory landscape has undergone a number of recent significant changes. New SEC registration requirements and Form PF filings in the US continue to challenge hedge funds. Internationally, increased calls for Asian hedge fund regulation in countries such as Singapore and Australia, as well as discussions surrounding MiFID II and the EU passport directive in Europe, continue to complicate the web of legal and regulatory rules.

DATE: October 23, 2012

TIME: 10:30am to 11:30am EDT


• Jason Scharfman, Managing Partner, Corgentum Consulting

• Paul Brook, Principal, Compliance Solutions Associates

Bart Mallon, Partner, Cole-Frieman Mallon & Hunt LLP

Some of the topics that will be covered during the Webinar include:

• Techniques for evaluating fund compliance programs

• Evaluating legal documentation risk

• Understanding the effects of recent hedge fund case law

• Monitoring ongoing fund adherence to regulatory requirements

If you are interested in joining the “Techniques for Analyzing Hedge Fund Compliance and Legal Risks During Operational Due Diligence” Webinar, please visit https://www1.gotomeeting.com/register/389516416 or contact [email protected]

# # #

About Corgentum Consulting

Corgentum Consulting is a specialist consulting firm which performs operational due diligence reviews of fund managers. The firm works with investors including fund of funds, pensions, endowments, banks and family offices to conduct the industry’s most comprehensive operational due diligence reviews. Corgentum’s work covers all fund strategies globally including hedge funds, private equity, real estate funds, and traditional funds. The firm’s sole focus on operational due diligence, veteran experience, innovative original research and fundamental bottom up approach to due diligence allows Corgentum to ensure that the firm’s clients avoid unnecessary operational risks. Corgentum is headquartered at 26 Journal Square, Suite 1005 in Jersey City, New Jersey, 07306. Phone 201-360-2430. The Web site is www.corgentum.com.


Cole-Frieman & Mallon LLP provides hedge fund compliance and legal services to investment management community. Bart Mallon can be reached directly at 415-868-5345.


Karl Cole-Frieman Speaking at Fund Compliance Event

On December 1st and 2nd Private Equity International (PEI) will be hosting a Fund Compliance Forum in San Francisco.   The forum will be focused on providing private equity firms with information on various Dodd-Frank compliance requirements, including the investment adviser registration requirement.  Karl Cole-Frieman, a partner with Cole-Frieman & Mallon LLP, will a panelist and will be discussing the compliance issues associated with marketing materials.  The overview of the session by Karl can be found here.

Information on the event is posted below and can be found on the PEI website by clicking here.


PEI Private Fund Compliance Forum: San Francisco

An enormous collective sigh of relief was felt around the private equity world when the SEC announced that the deadline to register was moved to March 30, 2012. This extension has given private equity firms more time to designate a chief compliance officer, implement a compliance program, and file all necessary forms with the SEC.

The PEI Private Fund Compliance Forum: San Francisco provides private equity and venture capital firms an opportunity to gain a more complete understanding of what newly registered private funds should expect post-registration and how to implement and manage an effective compliance program.

This one and a half day event, divided into panel discussions and in-depth workshop sessions, is tailored to firms that are in the process of registering with the SEC, those firms that are seeking more information about the scope of what is entailed in registration as well as those who are already operating as RIAs that are looking to enhance their compliance functions.


Panel: Effective and appropriate marketing materials

10:40 – 11:45

• Interpreting rules governing marketing and advertising

• Making sure that presentations are reviewed by compliance

• Making sure your web sites are in compliance

• Guidelines regarding talking to the press


Janis Kerns, Editor, ACA Insight

Panel Members:

Karl A. Cole-Frieman, Partner, Cole-Frieman & Mallon LLP

Jennifer Keese-Powell, Marketing Manager, Hall Capital Partners LLC

Lois Towers, Compliance Officer, Pantheon Ventures (US)


Cole-Frieman & Mallon LLP provides a variety of services including: hedge fund formation, advisor registration and counterparty documentation, CFTC and NFA matters, seed deals, internal investigations, operational compliance, regulatory risk management, hedge fund due diligence, marketing and investor relations, employment and compensation matters, and routine business matters. For more information please visit us at: http://www.colefrieman.com/.

Karl Cole-Frieman Speaking at San Francisco Hedge Fund Event

Dodd-Frank Implementation Considerations for Private Equity and Hedge Funds

On October 18th Grant Thornton LLP and Financial Women’s Association of San Francisco will be hosting a panel discussion and reception focused on regulatory issues for hedge funds and private equity funds.  Karl Cole-Frieman, a partner with Cole-Frieman & Mallon LLP, will be the attorney on the panel and will be discussing both the legal and business aspects of compliance with the various Dodd-Frank regulations.

Information on the event is posted below and you can register for the event by clicking here.


Grant Thornton LLP and the Financial Women’s Association of San Francisco invite you to join our upcoming panel discussion, focusing on implementation considerations for Private Equity and Hedge Funds under the Dodd-Frank Act. At this informative event, professionals from the industry will discuss various hot topics including:

  • Registration requirements
  • Restructuring considerations
  • Implementation and best practices
  • Focus areas of SEC examinations
  • Cost effective ways to comply with Dodd-Frank

Featured Panelists

Winston Wilson – National Financial Services Sector Leader, Grant Thornton LLP

Mark Catalano – Director, Deutsche Bank, Alternative Fund Services

Chris Lombardy – Member, Regulatory compliance, Kinetic Partners

Karl Cole-Frieman – Partner, Cole-Frieman & Mallon LLP

Moderated by Ann Oglanian, President & CEO, ReGroup LLC


4:00 – 4;30 p.m. Registration*

4:30 – 6:00 p.m. Panel / Q&A

6:00 – 7:00 p.m. Cocktail reception


Omni Hotel

500 California Street

2nd Floor

San Francisco, CA 94104

* This event is by invitation only. Spots are limited so register early!


Cole-Frieman & Mallon LLP provides a variety of services including: hedge fund formation, advisor registration and counterparty documentation, CFTC and NFA matters, seed deals, internal investigations, operational compliance, regulatory risk management, hedge fund due diligence, marketing and investor relations, employment and compensation matters, and routine business matters. For more information please visit us at: http://www.colefrieman.com/.

Hedge Fund SEC Custody Rule Overview

Compliance Requirements of the SEC Custody Rule

Hedge fund managers are preparing to register as investment advisers with the SEC pursuant to the new Dodd-Frank registration requirements.  One of the issues which managers will be dealing with during that process is the hedge fund custody rule (Rule 206(4)-2 under the Investment Advisers Act).  In general this means that the SEC registered fund manager will need make sure that the fund (1) maintains its assets with a qualified custodian and (2) has an annual audit by a PCAOB Registered and Inspected audit firm.

Hedge Fund Managers Generally Have Custody

The requirements of the SEC Custody Rule are triggered when an investment adviser has “custody.”  A fund manager is deemed to have “custody” of the fund's assets when it, or a related person, directly or indirectly has authority to obtain possession of” the fund's assets.  The Rule specifically indicates that custody includes any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives the investment adviser or a related person “legal ownership of or access to client funds or securities.”

Because hedge funds are generally structured so that the manager or a related entity serves as the general partner, hedge fund managers will generally be deemed to have custody under the Rule.  Managers who also provide advice through separate accounts would not be considered to have custody of those separate accounts unless they have authority to automatically deduct fees from the account (or have custody for some other reason).  If a manager is deemed to have custody, the manager will generally need to follow certain safe-keeping requirements.

Qualified Custodian Requirement

The first safe-keeping requirement of the Rule is that a fund's cash and securities must be maintained at a qualified custodian in “a separate account for each [fund] under that [fund’s] name” or in an account under the name of the fund manager as agent for the fund. Under the Rule, “qualified custodians” include banks, registered broker-dealers, registered futures commission merchants, and foreign financial institutions that customarily hold financial assets for their customers.  Hedge fund managers generally satisfy the qualified custodian requirement by holding funds’ cash and securities at a prime broker or other broker-dealer.

Audit Requirement

Managers of hedge funds are exempt from the Rule’s other safe-keeping requirements (or are deemed to comply with those requirements) if the fund has its financial statements audited annually and upon liquidation.  The audited financial statements must be prepared in accordance with generally accepted accounting principles (GAAP) and the audit must be conducted by an “independent public accountant that is registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board [(PCAOB)] in accordance with its rules.” Care should be taken to ensure that any audit firm engaged by a fund is subject to regular inspection by the PCAOB.

The annually audited financial statements must be delivered to all limited partners within 120 days of the end of” a fund’s fiscal year.

Alternative to the Annual Audit Requirement

If a hedge fund manager does not qualify for the exemptions from other safe-keeping requirements by conducting an annual fund audit as discussed above, the other provisions to the Rule require that the manager to: (1) instruct the fund's qualified custodian(s) to send quarterly account statements directly to each limited partner, and (2) engage an independent public accountant to conduct an actual “surprise” examination of the funds’ cash and securities and file Form ADV-E with the SEC.

Because most funds will have an annual audit, the surprise examination alternative is rare.

Responses to Form ADV Questions Regarding Custody

In addition to satisfying the safe-keeping requirements of the Rule, hedge fund managers must make certain disclosures regarding custody on their Form ADV.  Form ADV Part 1, Item 9.A requires managers to disclose the amount of funds and securities for which they have custody and Item 9.B requires the same disclosure for related persons of the manager.  Additionally, Item 9.C requires managers to indicate whether they have engaged an accountant to conduct an annual audit of funds’ financial statements (and whether the managers use other means of satisfying the Rule’s safety requirements).  The name and contact information of the accountant so engaged must be provided in Form ADV Schedule D, Section 9.C.  Information provided on Form ADV Part 1, Item 9 (except the amount of funds and securities and number of clients for which the manager has custody) is considered material and must be updated promptly whenever there is a change.

Item 15 of Form ADV Part 2 (the Brochure) requires additional disclosures for those managers who have instructed qualified custodians to send account statements directly to the investors.

Other Items

For most fund managers who will be going through the SEC registration process, complying with the custody rule will be a straight forward exercise.  State-registered investment advisers are subject to the various custody rules of the states in which they are registered.

For more information, please also see SEC Responses to Custody Rule Questions.


Cole-Frieman & Mallon LLP provides investment adviser registration and compliance support to hedge fund managers.  Bart Mallon can be reached directly at 415-868-5345.  Karl Cole-Frieman can be reached at 415-352-2300.


States to Begin Proposing Rules on Expert Networks

Massachusetts Proposes Compliance Rules for Using Expert Networks

Expert networks have been a major topic over the last few months and we are seeing the states, in addition to the SEC, focus on this area as a compliance issue for investment advisers.  Massachusetts recently revoked the state investment adviser license of a manager who was using expert networks to gain inside information and then trade on that information.  Massachusetts is now proposing regulations which would require state registered managers to develop certain policies with respect to use of expert


The proposed regulation provides generally that investment advisers may not use expert network services unless the adviser receives a signed certification from the consultant (sourced by the expert network firm) that:

  • describes the confidential restrictions the consultant has regarding confidential information and
  • the consultant affirmatively states that he will not provide any confidential information to the adviser

In addition to this new compliance requirement, the proposal codifies the general prohibition against trading on inside information.

The full text of the proposed regulation is printed below and can be found here.  The Massachussets Securities Division will hold a public hearing on these and other proposed regulations on June 23 and will accept written comments until June 24.


Preamble to Proposed Regulation

Investment Advisers Using Matching or Expert Network Services – Dishonest or Unethical Conduct in the Securities Business

The Division proposes to add a new section under 950 CMR 12.205(9)(c)(16) to the existing list of dishonest and unethical practices. The Division believes this addition is necessary to address the rising use of expert network firms by investment advisers to facilitate paid consultations between investment advisers and industry experts.

As alleged in In the Matter of Risk Reward Capital Management Corp., RRC Management LLC, RRC BioFund LP, and James Silverman, Docket No. E-2010-057, some investment advisers have paid expert networks and consultants to access confidential information about

publicly traded companies. The rise of expert network firms, and the number of abuses which have been addressed by regulators, make it clear that additional measures are required to ensure that confidential information is not being accessed and traded upon. The Division's proposed regulations, while not altering investment advisers' existing duty not to trade on insider information, seek to provide investment advisers with greater clarity as to what is impermissible conduct when paying consultants for information.


Proposed Regulation

Investment Advisers Using Matching or Expert Network Services – Dishonest or Unethical Conduct in the Securities Business

Add the following new subsection (16) to 950 CMR 12.205(9)(c) (non-exclusive list of practices by an investment adviser which shall be deemed “dishonest or unethical conduct or practices in the securities business”):

16. a. To retain consulting services, for compensation that is provided either directly to the consultant or indirectly through a Matching or Expert Network Service, unless the adviser obtains a written certification, signed by the consultant that:

(i) describes all confidentiality restrictions that the consultant has, or reasonably expects to have, regarding Confidential Information; and
(ii) affirmatively states that the consultant will not provide any Confidential Information to the adviser.

b. Notwithstanding section (a) an investment adviser who comes into possession of material Confidential Information through a consultation is precluded from trading any relevant security until such time as the Confidential Information is made public.

c. Definitions. For purposes of this section:

(i) “Confidential Information” means any non-public information, which one is bound by a confidentiality agreement or fiduciary (or similar) duty not to disclose.
(ii) “Matching or Expert Network Service” means a firm that for compensation matches consultants with investment advisers.


Cole-Frieman & Mallon LLP is a boutique hedge fund law firm.  In addition to investment adviser registration and compliance, we provide expert network compliance consulting services to SEC and state registered hedge fund managers.  Bart Mallon can be reached directly at 415-868-5345.


Rule 204-4 – Reporting by Exempt Reporting Advisers

Proposed Rule 204-4 Pursuant to Dodd-Frank 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.  The following proposed new rule 204-4 provides that certain “exempt reporting advisers” are required to file Form ADV with the SEC.  The instructions to Form ADV will specify which information on Form ADV is to be completed by such “exempt reporting advisers.”

The term “exempt reporting advisers” means an adviser exempt from SEC registration because:

  • the adviser only advises solely one or more “venture capital funds” (Advisers Act Section 203(l)); or
  • the adviser acts only as an adviser to private funds and has AUM in the US of less than $150MM (Advisers Act Section 203(m)).

The full proposed revised rule is reprinted below.


§ 275.204-4 Reporting by exempt reporting advisers.

(a) Exempt Reporting Advisers. If you are an investment adviser relying on the exemption from registering with the Commission under section 203(l) or (m) of the Act (15 U.S.C. 80b-3(l) or 80b-3(m)), you must complete and file reports on Form ADV (17 CFR 279.1) by following the instructions in the Form, which specify the information that an exempt reporting adviser must provide.

(b) Electronic Filing. You must file Form ADV electronically with the Investment Adviser Registration Depository (IARD) unless you have received a hardship exemption under paragraph (e) of this section.

Note to paragraph (b): Information on how to file with the IARD is available on the Commission’s website at http://www.sec.gov/iard.

(c) When filed. Each Form ADV is considered filed with the Commission upon acceptance by the IARD.

(d) Filing fees. You must pay FINRA (the operator of the IARD) a filing fee. The Commission has approved the amount of the filing fee. No portion of the filing fee is refundable. Your completed Form ADV will not be accepted by FINRA, and thus will not be considered filed with the Commission, until you have paid the filing fee.

(e) Temporary hardship exemption.

(1) Eligibility for exemption. If you have unanticipated technical difficulties that prevent submission of a filing to the IARD system, you may request a temporary hardship exemption from the requirements of this chapter to file electronically.

(2) Application procedures. To request a temporary hardship exemption, you must:

(i) File Form ADV-H (17 CFR 279.3) in paper format no later than one business day after the filing that is the subject of the ADV-H was due; and

(ii) Submit the filing that is the subject of the Form ADV-H in electronic format with the IARD no later than seven business days after the filing was due.

(3) Effective date – upon filing. The temporary hardship exemption will be granted when you file a completed Form ADV-H.

(f) Final Report. You must file a final report in accordance with instructions in Form ADV when:

(1) You cease operation as an investment adviser;

(2) You no longer meet the definition of exempt reporting adviser under paragraph (a); or

(3) You apply for registration with the Commission.

Note to paragraph (f): You do not have to pay a filing fee to file a final report on Form ADV through the IARD.


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

Rule 203A-5 – IA Registration Transition Rules

Proposed Rule 203A-5 Pursuant to Dodd-Frank 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.  The following proposed new rule 203A-5 provides that (i) SEC registered investment advisers must report their AUM to the SEC by August 20, 2011 and (ii) if such advisers are at that time below the threshold for SEC registration, the adviser must withdraw from SEC registration by October 19, 2011 (and generally be registered with the state in which the adviser’s maintains its principle office and place of business).

The full proposed revised rule is reprinted below.


§ 275.203A-5 Transition rules.

(a) Every investment adviser registered with the Commission on July 21, 2011 shall file an other-than-annual amendment to Form ADV (17 CFR 279.1) no later than August 20, 2011 and shall determine its assets under management based on the current market value of the assets as determined within 30 days prior to the date of filing the Form ADV.

(b) If an investment adviser registered with the Commission on July 21, 2011 would be prohibited from registering with the Commission under section 203A(a)(2) of the Act (15 U.S.C. 80b-3a(a)(2)), and is not otherwise exempted by § 275.203A-2 from such prohibition, such investment adviser shall withdraw from registration with the Commission by filing Form ADV-W (17 CFR 279.2) no later than October 19, 2011. During this period while an investment adviser is registered with both the Commission and one or more state securities authorities, the Act and applicable State law will apply to the investment adviser’s advisory activities.

(c) If, prior to the effective date of the withdrawal from registration of an investment adviser on Form ADV-W, the Commission has instituted a proceeding pursuant to section 203(e) of the Act (15 U.S.C. 80b-3(e)) to suspend or revoke registration, or pursuant to section 203(h) of the Act (15 U.S.C. 80b-3(h)) to impose cipro dosage terms or conditions upon withdrawal, the withdrawal from registration shall not become effective except at such time and upon such terms and conditions as the Commission deems necessary or appropriate in the public interest or for the protection of investors.


Bart Mallon, Esq. is a hedge fund lawyer and providers legal services to hedge fund managers through Cole-Frieman & Mallon LLP.  He can be reached directly at 415-868-5345.

Rule 203A-1 – Switching to or from SEC IA Registration

Proposed Rule 203A-1 Pursuant to Dodd-Frank 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.  The following proposed new rule 203A-1 will replace existing Rule 203A-1.  The new rule will provide state and SEC registered investment advisers with information on the time requirements for switching between the registration status.  The full proposed revised rule is reprinted below.


§ 275.203A-1 Switching to or from SEC registration.

(a) State-registered advisers—switching to SEC registration. If you are registered with a state securities authority, you must apply for registration with the Commission within 90 days of filing an annual updating amendment to your Form ADV reporting that you are eligible for SEC registration and are not relying on an exemption from registration genuine viagra online under sections 203(l) or 203(m) of the Act (15 U.S.C. 80b-3(l), (m)).

(b) SEC-registered advisers—switching to State registration. If you are registered with the Commission and file an annual updating amendment to your Form ADV reporting that you are not eligible for SEC registration and are not relying on an exemption from registration under sections 203(l) or 203(m) of the Act (15 U.S.C. 80b-3(l), (m)), you must file Form ADV-W (17 CFR 279.2) to withdraw your SEC registration within 180 days of your fiscal year end (unless you then are eligible for SEC registration). During this period while you are registered with both the Commission and one or more state securities authorities, the Act and applicable State law will apply to your advisory activities.


Bart Mallon, Esq. runs the hedge fund law blog and provides hedge fund registration and compliance services to managers through Cole-Frieman & Mallon LLP.  He can be reached directly at 415-868-5345.

SEC Proposes New IA and Hedge Fund Registration Rules

Seeks Public Comment on Proposed Regulations

On November 19, the SEC released proposed rules with respect to the new hedge fund registration requirement under the Dodd-Frank act.  The major proposals include the following:

  1. Rules with respect to the manner and process of registration of hedge fund and private equity fund managers.
  2. Reporting requirements for registered hedge fund and other private fund managers.  This will include:
    • Basic organizational and operational information about the funds they manage, such as information about the amount of assets held by the fund, the types of investors in the fund, and the adviser’s services to the fund.
    • Identification of five categories of “gatekeepers” that perform critical roles for advisers and the private funds they manage (i.e., auditors, prime brokers, custodians, administrators and marketers).
  3. Reporting requirements for non-registered private fund managers (including venture capital funds).  This will include:
    • Basic identifying information for the adviser and the identity of its owners and affiliates.
    • Information about the private funds the adviser manages and about other business activities that the adviser and its affiliates are engaged in that present conflicts of interest that may suggest significant risk to clients.
    • The disciplinary history of the adviser and its employees that may reflect on their integrity.
    • Exempt reporting advisers would file reports on the Commission’s investment adviser electronic filing system (IARD), and these reports would be publicly available on the Commission’s website.
  4. Defining the term “venture capital fund” and the term “foreign private adviser”.
  5. Providing guidance on SEC to state registration for managers who will no longer be allowed to register with the SEC due to increase in registration asset threshold

We will have the opportunity to fully review these proposals over the next few days and will be providing a report on the proposed regulations and will outline the comments we intend to send to the SEC.  Public comments on the proposal will be due to the Commission in early January 2011.

The SEC summary of the proposed regulations can be found discount viagra soft gels here.  The full texts of the two sets of proposals are below:


Bart Mallon, Esq. runs the hedge fund law blog and provides registration and hedge fund compliance services to managers through Cole-Frieman & Mallon LLP.  He can be reached directly at 415-868-5345.