Almost two years since the near collapse of the global financial markets, President Barack Obama has signed into law the most sweeping regulatory reform legislation since the great depression – the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The most significant effect on investment advisers, who have business in the US or (in certain cases) have even tangential relationships with US investors, is the requirement to register with the US Securities and Exchange Commission.
“The expanded authority of the SEC will have a far reaching effect on the alternative investment industry, both in the US and abroad. Not only will most investment advisers now be required to register, they will also be faced with more onerous reporting obligations. Therefore, advisers need to consider how they will respond to the heightened scrutiny and the SEC’s new demands,” says Neil Morris, a member of Kinetic Partners.
The amount of AUM and the types of clients or investors served will determine the registration requirements for investment advisers. The basic thresholds are as follows: AUM of USD150m or greater = registration with the SEC; AUM of USD25m to USD150M = registration with the state regulator.
Non US investment advisers are exempt from registration if: no place of business in US; less than USD25m of investments from US investors; less than 15 US investors; adviser does not hold itself out generally to the public in the US as an investment adviser.
Other exemptions include venture capital fund advisers, registered commodity trading advisers and family offices (all of which fall within particular specifications).
Registration provisions will take effect one year from today’s signing by President Obama.
The SEC will have the ability to request information (in addition to records already required) as it deems necessary to protect investors and for the assessment of systemic risk.