California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 2 - Corporate Securities › Article 8 - Licensing of Broker-Dealers and Agents › Section 260.204.9 - Certificate Exemption for Investment Advisers to Private Funds

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Definitions.
				  For purposes of this section
				  260.204.9 (this "rule"), the
				  following definitions shall apply:
(1)
				  "Private fund adviser" means an investment adviser who provides advice solely
				  to one or more qualifying private fund(s).
(2) "Qualifying private fund" means an issuer
				  that qualifies for the exclusion from the definition of an investment company
				  under one or more of sections
				  3(c)(1),
				  3(c)(5), and
				  3(c)(7) of the
				  Investment Company Act of 1940, as amended (15 U.S.C.
				  80a-3(c)(1), (5) and
				  (7)).
(3) "Retail buyer fund" means a qualifying
				  private fund that is not a venture capital company and that qualifies for the
				  exclusion from the definition of an investment company under one or both of
				  sections 3(c)(1) and
				  3(c)(5) of the
				  Investment Company Act of 1940, as amended (15 U.S.C.
				  80a-3(c)(1) and
				  (5)).
(4) "Venture capital company" means an entity
				  that satisfies one or more of the conditions below:
(A) on at least one occasion during the
				  annual period commencing with the date of its initial capitalization, and on at
				  least one occasion during each annual period thereafter, at least fifty percent
				  (50%) of its assets (other than short-term investments pending long-term
				  commitment or distribution to investors), valued at cost, are venture capital
				  investments, as defined in subsection (a)(5) of this rule, or derivative
				  investments, as defined in subsection (a)(6) of this rule; or
(B) the entity is a "venture capital fund" as
				  defined in rule 203(
l
)-1 adopted by the Securities and
				  Exchange Commission under the Investment Advisers Act of 1940, as amended
				  (17 C.F.R.
				  275.203 (
l
)-(1));
				  or
(C) the entity is a "venture
				  capital operating company" as defined in rule 2510.3-101(d) adopted by the U.S.
				  Department of Labor under the Employee Retirement Income Security Act of 1974
				  (29 C.F.R. §
													2510.3-101(d)).
(5) "Venture capital investment" means an
				  acquisition of securities in an operating company as to which the investment
				  adviser, the entity advised by the investment adviser, or an affiliated person
				  of either has or obtains management rights as defined in subsection (a)(7) of
				  this rule.
(6) "Derivative
				  investment" means an acquisition of securities by a venture capital company in
				  the ordinary course of its business in exchange for an existing venture capital
				  investment either (i) upon the exercise or conversion of the existing venture
				  capital investment or (ii) in connection with a public offering of securities
				  or the merger or reorganization of the operating company to which the existing
				  venture capital investment relates.
(7) "Management rights" means the right,
				  obtained contractually or through ownership of securities, either through one
				  person alone or in conjunction with one or more persons acting together or
				  through an affiliated person, to substantially participate in, to substantially
				  influence the conduct of, or to provide (or to offer to provide) significant
				  guidance and counsel concerning, the management, operations or business
				  objectives of the operating company in which the venture capital investment is
				  made.
(8) An "operating company"
				  means an entity that is primarily engaged, directly or through a majority owned
				  subsidiary or subsidiaries, in the production or sale (including any research
				  or development) of a product or service other than the management or investment
				  of capital, but shall not include an individual or sole
				  proprietorship.
(9) "Affiliated
				  person" means a person that controls, is controlled by, or is under common
				  control with the other specified person(s).
(10) "Control" means possessing, directly or
				  indirectly, the power to direct or cause the direction of management and
				  policies.
(11) "Advisory affiliate"
				  means an "advisory affiliate" as defined in the Glossary of Terms to Form ADV
				  (Uniform Application for Investment Adviser Registration (17 C.F.R. §
												279.1).
(12) "Fund of funds" means a qualifying
				  private fund that invests a majority of its assets in one or more qualifying
				  private funds.