Tag Archives: Investment Advisor

Hedge Fund Managers and Investment Advisor Registration Status

Leave a reply

Many hedge fund managers who are registered as investment advisors with the SEC have experienced losses this year as well as investor redeptions.  For some managers the losses combined with investor redemptions may have the effect of decreasing an advisor’s assets below the $25million threshold for SEC investment advisor registration.  Generally an investment advisor is not allowed to be registered with the SEC if the manager’s assets under management do not exceed $25 million. Continue reading →

Hedge Funds Blindsighted by Massive Ponzi Scheme

Leave a reply

According to a SEC release this morning (and every other financial news agency), major hedge funds, banks and other financial institutional were caught in a Ponzi scheme of epic proportions.  While it is hard to believe that such large groups were blindsighted by this, it does showcase the fact that fraud can happen to even sophisticated investors and that hedge fund due diligence (an ongoing due diligence) is absolutely required.  The SEC release is reprinted below. Continue reading →

Wisconsin Based Hedge Funds – Wisconsin Investment Advisory Rules

1 Reply

One of the key issues which hedge fund managers will need to determine early in the hedge fund formation process is whether the management company will need to be registered as an investment adviser with the state securities commission (or potentially with the SEC).  Generally the lawyer advising the management company will survey the state laws to determine whether or not registration is necessary.  While the lawyer will look directly to the state statutes through some sort of online legal database such as Lexis Nexis (to ensure that the most current and up to date information is provided to the client), the hedge fund manager can also check with his state securities commission to see if registration is required.  Sometimes states, such as Wisconsin, will include their registration information on their website.  The notice below is typical of such a practice. Continue reading →

New Hedge Fund Regulation: Guidance From Former SEC Commissioner Should be Followed

1 Reply

In the conversations the hedge fund community will be having with Congress and the regulators in the coming months regarding increased regulation, we should look to shared answers to the issues which need to be addressed.  In this vein, I have been researching the speeches of prominent SEC personel.  I have just recently reviewed a speech by former Commissioner Paul Atkins regarding regulations and how regulations impact the investment management community.  Perhaps surprising to some, the former Commissioner showed reasonably thinking with regard to increased regulation.

The speech, reprinted in its entirety below, was given in the wake of the proposed adoption of two rule changes back in December of 2006.  The first proposed rule change was to amend the Investment Advisers Act so that it was clear that hedge fund managers had an anti-fraud duty to the investors in their hedge funds as well as the hedge funds themselves.  The second proposed rule was the “accredited natural person” rule which would effectively change the potential make up of hedge funds by requiring a different net worth threshold for investors in hedge funds.  There were a significant amount of comments to the proposed rules which stated that it would be a bad idea to raise the net worth requirements for hedge fund investors.  Neither of the proposed rules have been adopted and it is unlikely that they will be, at least in the near future.  Continue reading →

California Investment Advisors Renewal Notice

2 Replies

I received this notice today from the California Department of Corporations.  All California registered Investment Advisors should take note that IARD renewal fees are due by next Friday, December 12.  If you are registered and need help with the renewal process, please contact us.  Continue reading →

Investment Advisor Barred From IA Industry For Matching Trade Fraud

Leave a reply

Hedge fund managers should not match trades between commonly managed accounts in thinly traded (or illiquid) securities as this may pose potential problems under the Investment Advisors Act of 1940.  This holds true whether the hedge fund manager is registered or unregistered.  As the release below shows, the manager may be subject to fines and/or other penalties for such trading.  If a hedge fund manager does wish to engage in such trading, he should discuss this option with a hedge fund attorney.  Please contact us if you have any questions.  Continue reading →

Open Letter to CEOs of SEC-Registered Firms (SEC Release)

1 Reply

Open Letter to CEOs of SEC-Registered Firms
December 2, 2008

Dear CEO of SEC-Registered Firm:

During this time of financial and market turmoil, the Office of Compliance Inspections and Examinations of the Securities and Exchange Commission reminds leaders of SEC-registered firms, including broker-dealers, investment advisers, investment companies and transfer agents, of the critical role played by your firm’s compliance programs in helping to meet your obligations under the securities laws. Your firm’s compliance function is critical to assure that your operations comply with the law and rules for industry participation and to ensure that the interests of your customers, clients and shareholders are protected. Moreover, compliance is a vital control function that helps to protect the firm from conduct that could negatively impact the firm’s business and its reputation. Continue reading →

SEC Staff Reminds CEOs Of Registered Firms of Importance of Compliance Programs (SEC Release)

Leave a reply

SEC Staff Reminds CEOs Of Registered Firms of Importance of Compliance Programs
FOR IMMEDIATE RELEASE
2008-283

Washington, D.C., Dec. 2, 2008 — The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations today issued an open letter to chief executives of SEC-registered firms, including broker-dealers, investment advisers, investment companies and transfer agents, to remind them of the critical role played by their firms’ compliance programs in assuring that their operations comply with the law and rules for industry participation and to ensure that the interests of customers or clients are protected. Continue reading →

Withdrawing from Investment Advisor Registration – the Form ADV-W

4 Replies

For many different reasons a hedge fund manager will decide to de-register as an investment advisor.  The manager may no longer be required to be registered or a manager may have registered simply for marketing purposes and has found that it is too much of a hassle (and cost) to be registered.   In such instances a hedge fund manager can withdrawal from registration by filing Form ADV-W through the IARD (Investment Advisor Registration Depository) system.   The process for de-registering is substantially the same whether the manager is registered with the SEC or with the state securities commission.  This article will discuss (i) issues with de-registration for the hedge fund manager and (ii) detail the process of deregistering.  Continue reading →

California Investment Advisor Exemption for Certain Hedge Fund Managers

9 Replies

In the article Connecticut Hedge Fund Registration Exemption, we discussed that certain states like Connecticut provide administrative orders allowing hedge fund managers an exemption from the registration provisions under certain circumstances.

Similarly certain states have provided a similar exemption to hedge fund managers through the securities commission rule making process.  For example, California Rule 260.204.9 provides that hedge fund managers are exempt from registration with the California Securities Commission if (i) the manager has $25 million or more in assets under management and (ii) has less than 15 clients (a hedge fund counts as a single client).  As with all exemptions from investment advisor registration, the hedge fund manager must make sure that it does not hold itself out as an investment advisor.  The California Rule also provides an exemption for managers of venture capital funds. Continue reading →