SEC Considers Extension of Compliance Dates for Investment Adviser Registration and Deregistration Requirements Under Dodd-Frank

On Friday, April 8, 2011, the Associate Director of the SEC's Division of Investment Management, Robert E. Plaze, issued a letter to the President of the North American Securities Administrators Association (NASAA), indicating that the SEC will likely grant additional time for investment advisers subject to Dodd-Frank’s new registration requirements to register with the states or the SEC until the first quarter of 2012. Although the letter does not constitute formal SEC action and is not binding on the Commission, it does recognize the fact that the fast approaching July 21, 2011 deadline may not provide enough time to transition to the new rules.

Section 403 of the Dodd-Frank Act repeals the “private adviser exemption” in section 203(b)(3) of the Advisers Act currently relied on by advisers to hedge funds and other private funds, and requires private fund advisers with assets under management in excess of $150 million to register with the SEC. While SEC anticipates completing its rulemaking by the July 21, 2011 deadline, the letter states that the SEC will consider providing additional time for private fund advisers to register and comply with the requirements applicable to registered advisers.

Additionally, the letter mentions that “mid-sized advisers” (advisers with assets under management between $25 million and $100 million) that are required to transition to state registration under Section 410 of the Dodd-Frank Act, will be given a grace period during which they will be permitted to come into compliance with state law before withdrawing their SEC registration. This is in part due to the fact that once final rules are adopted, the IARD system will require reprogramming in order to ease the transition from SEC to state registration, which will take until the end of the year to complete.

Although the letter indicates the likely extension of the compliance dates, firms affected by these provisions should continue to take steps necessary to register with the SEC or transition to state registration, as the case may be. For additional information, please contact Zac Rosenberg, Compliance Consultant by email at zachary.rosenberg@corecls.com or by phone at (619) 278-0020.