Seite - 104 - in Austrian Law Journal, Band 1/2015

ALJ 1/2015 Brian Carroll 104 Investment adviser registration requirements have changed over time.28 For example, histori- cally, many investment advisers advising private funds,29 such as hedge funds,30 relied on a so- called private adviser exemption under former § 203(b)(3) as a basis for avoiding investment adviser registration with the Commission. This exemption applied to an investment adviser that maintained fewer than fifteen clients within a discrete twelve-month period, did not hold itself out to the public as an investment adviser,31 and did not provide advice to an investment company.32 In 2004, however, the Commission promulgated a rule reinterpreting the term “client,”33 which caused the exemption to be applied more narrowly.34 As a result, many in- vestment advisers to private funds were required to register with the Commission. In 2006 the court in Goldstein v. SEC found the Commission’s reinterpretation of “client” was arbitrary and vacated this Commission rule.35 More recent amendments to the Advisers Act eliminated this private adviser exemption,36 again triggering Commission registration for many investment advisers advising private funds. Currently, investment advisers to a wide range of private funds37 are now required to register with the Commission.38 28 See Dodd-Frank Wall Street Reform and Consumer Protection Act, § 410, PL 111-203, 124 Stat. 1376 (July 1, 2010) (“Dodd-Frank Act”), inter alia, amending § 203A, State and Federal Responsibilities, 15 U.S.C. § 80b-3A (effectively increasing minimum amount of client assets under management from $ 25 to $ 100 million for Commission registration of certain investment advisers). 29 See § 202(a)(29), § 80b-2(a)(29) (“The term ‘private fund’ means an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940, but for section 3(c)(1) or 3(c)(7) of that Act.”); see also Rule 206(4)-8, Pooled Investment Vehicles, 17 C.F.R. § 275.6(4)-8. 30 Registration Under the Advisers Act of Certain Hedge Fund Advisers, Investment Advisers Act Release No. 2333 (Dec. 2, 2004) 4, 69 FR 72054, 72055 (Dec. 10, 2004) (adopting rule release), vacated, Goldstein v. Sec. & Exch. Comm’n, 451 F.3d 873 (D.C. Cir. 2006) (footnotes omitted) (“There is no statutory or regulatory definition of hedge fund, although many have several characteristics in common. Hedge funds are organized by profes- sional investment managers who frequently have a significant stake in the funds they manage and receive a management fee that includes a substantial share of the performance of the fund. Advisers organize and oper- ate hedge funds in a manner that avoids regulation as investment companies under the Investment Company Act of 1940, and hedge funds do not make public offerings of their securities.”) 31 See “Engaged in the Business” section of this article for a discussion of the concept of an investment adviser “holding out” to the public. 32 See former Section 203(b)(3), 15 U.S.C. § 80b-3(b)(3), and Rule 203(3)(b)-1, 17 C.F.R. § 275.3(3)(b)-1. 33 See Registration Under the Advisers Act of Certain Hedge Fund Advisers, Investment Advisers Act Release No. 2333 (Dec. 2, 2004), 69 FR 72054 (Dec. 10, 2004) (adopting rule release), (inter alia, reinterpreting the term “cli- ent” as it appears in § 203(b)(3), 15 U.S.C. § 80b-3(b)(3), and defined under Rule 203(b)(3)-1(a)(2), 17 C.F.R. § 275.3(b)(3)-1(a)(2)). 34 See Goldstein v. Sec. & Exch. Comm’n, 451 F.3d 873 (D.C. Cir. 2006) (vacating Registration Under the Advisers Act of Certain Hedge Fund Advisers, Investment Advisers Act Release No. 2333 (Dec. 2, 2004), 69 FR 72054 (Dec. 10, 2004) (adopting rule release)). 35 See id. 36 § 403 Dodd-Frank Act amended § 203 by eliminating the § 203(b)(3) private adviser exemption. See also Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers Act Release No. 3221 (June 22, 2011) n.4, 76 FR 42950 (July 19, 2011) (adopting rule release). 37 See, e.g., § 203(m), Exemption of and Reporting by Certain Private Fund Advisers, 15 U.S.C. § 80b-3(m); Rule 203(m)-1, Private Fund Adviser Exemption, 17 C.F.R. § 275.3(m)-l; Section 203(l), Exemption of Venture Capital Fund Advisers, 15 U.S.C. § 80b-3(l); Rule 203(l)-1, Venture Capital Fund Defined, 17 CFR § 275.3(l)-1. See gener- ally Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers With Less Than $ 150 million in Assets Under Management, and Foreign Private Advisers, Investment Advisers Act Release No. 3222 (June 22, 2011), 76 FR 39646 (July 6, 2011). 38 SEC. AND EXCH. COMM’N, DODD-FRANK ACT CHANGES TO INVESTMENT ADVISER REGISTRATION REQUIREMENTS 5 (Jan. 2, 2013) (reporting on number of registered investment advisers advising private funds such as hedge funds, private equity funds, venture capital funds, securitized asset funds, liquidity funds and the like).