The SEC has proposed amendments to the definition of a venture capital fund and the private fund adviser exemption under the Investment Advisers Act of 1940 in order to reflect changes made by the Fixing America’s Surface Transportation Act (FAST Act) of 2015.
Title LXXIV, section 74001 amended the exemption from investment adviser registration for any adviser solely to one or more “venture capital funds” in Adviser Act 203(l) by deeming “small business investment companies” to be “venture capital funds” for the purposes of exemption. Title LXXIV, section 74002 also amended the exemption from investment adviser registration for any adviser solely to “private funds” with less than $150 million in assets under management in Advisers Act section 203(m) by excluding the assets of “small business investment companies” when calculating “private fund assets” towards the registration threshold of $150 million.
Accordingly, the SEC is proposing to alter the definition of “venture capital funds” to include small business investment companies. It is also proposing to change the definition of “assets under management” to exclude the assets of small business investment companies. With these changes, advisers to small business investment companies can now rely on the following exemptions from registration with SEC: 1) the small business investment company adviser and advise only small business investment companies, 2) the venture capital fund adviser exemption and advise both small business investment companies and venture capital funds, or 3) the private fund adviser exemption and advise both small business investment companies and non-small business investment company funds provided they account for less than $150 million in assets under management in the US.
Specifically, the SEC is requesting comment on the following proposed changes:
| 1. | | In regards to rule 203(l)-1, commenters should address what other exemptions have been used by investment advisers prior to the FAST Act, whether or not the proposed amendment adequately reflects the changes required by the FAST Act, and applicable changes to Form ADV. |
| 2. | | In regards to rule 203(m)-1, commenters should address whether or not the proposed changes adequately reflect the changes required by the FAST Act and if any alternative methods would make the changes to the definitions clearer. |
The SEC is interested in public comments on these topics. The complete set of comment solicitations can be read in the full release concerning these proposed changes. Comments should be received by June 8th, 2017. You can submit comments using the form available on the SEC’s website or by e-mailing rule-comments@sec.gov with File Number S7-05-17 in the subject line. You can also use the Federal Rulemaking Portal to submit comments or send your comments by mail to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. Again, be sure to reference File Number S7-05-17.
Sources
SEC Release No. IA-4697: Amendments to Investment Advisers Act Rules To Reflect Changes Made by the FAST Act (www.sec.gov)
