SEC Provides Relief from Registration for Certain Advisers

On January 18, 2012, the staff of the Investment Management Division of the SEC issued a No-Action Letter (the “ABA Letter”) providing relief from registration for certain advisers that are affiliated with a registered adviser, subject to certain conditions. Significantly, the staff indicated that only one adviser may be required to file for registration (the “filing adviser”) for a group of related advisers who are controlled by or under common control with the filing adviser (each, a “relying adviser”), so long as (1) the filing adviser and each relying adviser collectively conduct a single advisory business and (2) the following conditions are met: 

  • The filing adviser and each relying adviser advise only private funds and separate account clients that are: (i) “qualified clients” eligible to invest in such private funds; and (ii) whose accounts pursue investment objectives and strategies that are substantially similar to those private funds;
  • Each relying adviser, its employees, and the persons acting on its behalf are subject to the filing adviser’s supervision and control;
  • The filing adviser’s principal office and place of business in the United States;
  • The advisory activities of each relying adviser are subject to the Advisers Act and the rules thereunder, and each relying adviser is subject to examination by the SEC;
  • The filing adviser and each relying adviser operate under a single code of ethics and a single set of written policies and procedures and administered by a single chief compliance officer; and
  • The filing adviser discloses in the Miscellaneous Section of Schedule D that it and its relying advisers are filing a single Form ADV in reliance on the position expressed in the ABA Letter and identifies each relying adviser by completing a separate Section 1.B. of Schedule D for each relying adviser and identifying it as such by including the notation “(relying adviser).”

In addition, the staff affirmed the relief provided in a 2005 No-Action Letter relief from registration for certain special purpose vehicles (“SPVs”) established by a registered adviser to act as a private fund’s general partner. The new ABA Letter also expanded the existing relief by stating that it would also apply to multiple SPVs created by a registered adviser (including those not acting as a general partner or managing member of a private fund), as well as to SPVs with independent directors.

The positions taken by the staff in the recent ABA Letter will enable registered advisers to avoid the costs of having to register related advisers and will also permit currently registered advisers to withdraw the registrations of certain related advisers that meet the conditions set forth above. For additional information, please contact Zac Rosenberg, Compliance Consultant by email at zachary.rosenberg@corecls.com or by phone at (619) 278-0020.