Source: http://www.hedgefundlawblog.com/rule-202a30-1-investment-advisers-act.html
Timestamp: 2013-05-19 08:44:24
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Matched Legal Cases: ['§ 270', '§ 230', '§ 230', '§ 230', '§ 275', '§ 279']

Rule 202(a)(30)-1 – Foreign Private Adviser DefinitionHedge Fund Law Blog | Hedge Fund Law Blog
Rule 202(a)(30)-1 – Foreign Private Adviser Definition
Leave a reply	Proposed Rule 202(a)(30)-1 Pursuant to Dodd-Frank Act
The SEC has proposed certain new rules as well as amendments to existing rules under the Investment Advisers Act as a result of the Dodd-Frank Act. The following proposed new rule 202(a)(30), among other things, defines the terms “client” and “investor” for the purposes of new Section 202(a)(30) of the Advisers Act which requires “foreign private advisers” to register with the SEC.
New section 202(a)(30) of the Advisers Act defines “foreign private adviser” as an investment adviser that
has no place of business in the United States,
has fewer than 15 clients in the United States and investors in the United States in private funds advised by the adviser, and
less than $25 million in aggregate assets under management from such clients and investors.
For the purposes of Section 202(a)(30)-1, a single “client” generally means:
a natural person, family members of the same household and accounts for such persons
an entity and not the “owners” of an entity (two entities with exactly the same ownership can, together, be counted as a single client)
Other rules with respect to the “client” definition:
an “owner” will be deemed to be a client separate from an entity if advisory services are provided to the owner separately from the entity
managers to a hedge fund or other private fund do not necessarily need to count the individual investors in the fund as a client
a fund entity will be a client of the manager of the fund entity
For the purposes of Section 202(a)(30)-1, the term “investor” will generally mean a “beneficial owner” (if the fund is a 3(c)(1) fund) or a “qualified purchaser” (if the fund is a 3(c)(7) fund). With respect to any “client” or “investor,” the term “in the United States” generally means any person who is a deemed to be a “U.S. person” as it is defined in Rule 902(k) of Regulation S under the Securities Act of 1933 (which is premised on residence in the United States, regardless of any temporary presence outside the United States).
The full proposed rule is reprinted below.
(a) Client. You may deem the following to be a single client for purposes of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)):
(ii) Any relative, spouse, or relative of the spouse of the natural person who has the same principal residence;
(b) Special rules regarding clients. For purposes of this section:
(2) You are not required to count an owner as a client solely because you, on behalf of the legal organization, offer, promote, or sell interests in the legal organization to the owner, or report periodically to the owners as a group solely with respect to the performance of or plans for the legal organization’s assets or similar matters;
(3) A limited partnership or limited liability company is a client of any general partner, managing member or other person acting as investment adviser to the partnership or limited liability company; and
(4) You are not required to count a private fund as a client if you count any investor, as that term is defined in paragraph (c)(1) of this section, in that private fund as an investor in the United States in that private fund.
Note to paragraphs (a) and (b): These paragraphs are a safe harbor and are not intended to specify the exclusive method for determining who may be deemed a single client for purposes of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)).
(c) Definitions. For purposes of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)),
(1) Investor means any person that would be included in determining the number of beneficial owners of the outstanding securities of a private fund under section 3(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1)), or whether the outstanding securities of a private fund are owned exclusively by qualified purchasers under section 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(7)), except that any of the following persons is also an investor:
(A) Any beneficial owner of the private fund that pursuant to § 270.3c-5 of this title would not be included in the above determinations under section 3(c)(1) and 3(c)(7) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1), (7)); and
(B) Any beneficial owner of any outstanding short-term paper, as defined in section 2(a)(38) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(38)), issued by the private fund.
Note to paragraph (c)(1): You may treat as a single investor any person that is an investor in two or more private funds you advise.
(2) In the United States means with respect to:
(i) Any client or investor, any person that is a “U.S. person” as defined in § 230.902(k) of this title, except that any discretionary account or similar account that is held for the benefit of a person in the United States by a dealer or other professional fiduciary is in the United States if the dealer or professional fiduciary is a related person of the investment adviser relying on this section and is not organized, incorporated, or (if an individual) resident in the United States.
Note to paragraph (c)(2)(i): A person that is in the United States may be treated as not being in the United States if such person was not in the United States at the time of becoming a client or, in the case of an investor in a private fund, at the time the investor acquires the securities issued by the fund.
(ii) Any place of business, in the United States, as that term is defined in § 230.902(l) of this title; and
(iii) The public, in the United States, as that term is defined in § 230.902(l) of this title.
(3) Place of business has the same meaning as in § 275.222-1(a) of this title.
(4) Assets under management means the regulatory assets under management as determined under Item 5.F of Form ADV (§ 279.1 of this title).
(d) Holding out. If you are relying on this section, you shall not be deemed to be holding yourself out generally to the public in the United States as an investment adviser, within the meaning of section 202(a)(30) of the Act (15 U.S.C. 80b-2(a)(30)), solely because you participate in a non-public offering in the United States of securities issued by a private fund under the Securities Act of 1933 (15 U.S.C. 77a).
Bart Mallon, Esq. is a hedge fund attorney and providers legal services to hedge fund managers through Cole-Frieman & Mallon LLP. He can be reached directly at 415-868-5345.
This entry was posted in Investment Advisor, Legal Resources, new hedge fund regulations and tagged foreign private advisers, investment adviser registration, rule 202(a)(30)-1, SEC registration, section 202(a)(30) on November 22, 2010 by Hedge Fund Lawyer.	Post navigation
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