May 26, 2020

May 26, 2020

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Amendments to the Venture Capital Fund Adviser and Private Fund Adviser Exemptions

Last month the SEC’s Division of Investment Management issued a guidance update[1] (Update) addressing recent amendments to the Advisers Act. These changes allow advisers that wish to rely on the private fund adviser or venture capital fund adviser exemptions to also manage an unlimited amount of assets attributable to small business investment companies (SBICs). 

In December, the Fixing America’s Surface Transportation Act (FAST Act) amended the venture capital fund adviser exemption (Section 203(l) and Rule 203(l)-1 thereunder) and the private fund adviser exemption (Section 203(m) and Rule 203(m)-1 thereunder) to include SBIC assets. Now, SBICs are deemed to be “venture capital funds” for purposes of the venture capital fund adviser exemption. In addition, advisers relying on the private fund adviser exemption may also have an unlimited amount of assets under management attributable to SBIC clients and still rely on the private fund adviser exemption, provided the other conditions of the exemption have been met, including the $150 million assets under management cap for non-SBIC private fund assets. Previously, serving as an exempt adviser to SBICs could prevent an adviser from qualifying for either exemption. 

The SEC is in the process of proposing amendments to Rules 203(l)-1 and 203(m)-1 to reflect the foregoing Advisers Act amendments. In the meantime, the Update states that the SEC staff would not object to an adviser relying on the FAST Act amendments to the venture capital fund adviser exemption or the private fund adviser exemption, provided the adviser files the requisite exempt reporting adviser filings as required under each exemption.


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About this Author

Peter D. Fetzer, Securities Lawyer, Foley Lardner, Mergers Attorney

Peter Fetzer is a partner and business lawyer with Foley & Lardner LLP. His practice focuses primarily in the areas of securities regulation, mergers and acquisitions, corporate governance and general corporate counseling to mutual funds, exchange traded funds, publicly traded investment advisers and public companies.

Stuart E. Fross, Foley Lardner, Securities lawyer, Finance Attorney

Stuart Fross is a partner and business lawyer with Foley & Lardner LLP where he concentrates his practice on securities laws and regulations, as part of the Private Equity & Venture Capital, Transactional & Securities and International Practices.

Mr. Fross’ main focus is investment managers and pooled investment vehicles, including U.S. registered open-end, closed end and exchange traded funds, bank collective investment funds (with an emphasis a stable value funds), UCITS funds, as well as private funds, organized in the US and offshore. Mr. Fross has extensive experience in equity, high-income and fixed income trading operations, as well as with distribution related issues for registered and unregistered funds. 

Michelle E.P. Nunez, Foley, Commercial restructuring lawyer, formation of funds attorney
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