Publications

David W. Blass, Chief Counsel of the SEC’s Division of Trading and Markets, spoke today at a meeting of the Trading and Markets Subcommittee of the American Bar Association on the subject of broker-dealer registration issues in the context of private investment funds.  Mr. Blass focused his remarks on: (i) the circumstances under which private fund adviser personnel marketing interests in a fund would be subject to the broker-dealer registration requirements; and (ii) transaction-based fees paid to private fund advisers in connection with transactions involving portfolio companies.

Mr. Blass indicated that the SEC may consider some form of exemption from the broker-dealer registration requirements for private fund adviser personnel, or a more limited type of registration. Mr. Blass also noted recent action taken by the SEC against unregistered "finders" and against the firms that used them. 

On the subject of transaction-based fees paid to private fund advisers by portfolio companies, the SEC is studying the issue.  Mr. Blass did note that to the extent the advisory fee is wholly reduced or offset by the amount of the transaction fee, then, in his view, it would not appear to raise broker-dealer registration concerns.

Mr. Blass’ speech signals that the broker-dealer registration issue is an evolving area for private investment funds, and sponsors should examine their current arrangements to consider whether they are in compliance with applicable law, and whether any adjustments are warranted.