Publications

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), a broad overhaul of the nation’s financial regulatory system. This memorandum focuses on the provisions of the Act that alter the registration, reporting and recordkeeping obligations applicable to private funds and their advisers.  Previously, private equity and hedge fund advisers generally were not required to register with the Securities and Exchange Commission (“SEC”) or comply with related reporting, recordkeeping and other burdens in reliance on the “private investment adviser” exemption under the Investment Advisers Act of 1940. Under the Act, however, private equity and hedge fund advisers will be required to register with the SEC if their advisee funds and other client accounts have $150 million in assets or more under management.  Advisers solely to “venture capital funds,” regardless of their size, are not required to register, although they will be subject to certain reporting requirements.  The registration, reporting and recordkeeping obligations become effective one year after the Act is enacted. While the Act establishes a framework for heightened regulation of the private funds industry, the provisions of the Act are in many respects incomplete (and in some cases intentionally so), and Congress has authorized the SEC and other federal regulators to fill in these gaps and complete this process through further analytical review, rulemaking and interpretation.  This administrative process will dictate important aspects of the reform and the exact ways in which the new legislation will affect private funds and their advisers.  As a result, it will likely be quite some time until such reforms are broadly implemented and the direct and indirect impact of the Act on the private funds industry is fully understood.