The SEC on Friday, voted to propose rules that would carve out exemptions from the registration requirements of the Investment Advisers Act of 1940 for advisers to certain privately offered investment funds.  There's a 45-day window for submitting comments. 

    Repealed Exemptions - Bringing Advisers to 'Private Funds Back Into the Fold.   The new exemptions would fill the gap left by Congress's appeal of the "private adviser exemption" under section 203(b)(3) of the Advisers Act - it exempted any investment adviser from registration if that adviser: (i) had had fewer than 15 clients in the preceding 12 months, (ii) did not hold itself out to the public as an investment adviser, and (iii) did not act as an investment adviser to a RIC or mutual fund.  Exempt advisers are not subject to reporting or recordkeeping provisions under the Advisers Act, and are not subject to examination by SEC staff.

For purposes of the private adviser exemption, a private fund - including a hedge fund, private equity fund and other types of pooled investment vehicles that are excluded from the definition of “investment company” - typically qualify as a single client.  As a result, investment advisers were able to form up to 14 private funds, regardless of the total number of investors investing in the funds,

    New Exemptions.   In place of the above broad exemptions, Congress created 3 exemptions from registration under the Advisers Act. These new exemptions apply to:

1. advisers solely to venture capital funds, without regard to the number of such funds advised by the adviser or the size of such funds;
2. advisers solely to private funds with less than $150 million in AUM (assets under management) in the U.S., without regard to the number or type of private funds advised;  and,
3. non-U.S. advisers with less than $25 million in aggregate AUM from U.S. clients and private fund investors and fewer than 15 such clients and investors.

The new rules that the SEC proposed on Friday, would implement these exemptions.

For further details, click onto:   [SEC Proposed Rule Release IA 3-1111, 11/19 - 135pp:  "Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers With Less Than $150 Million in Assets Under Management, and Foreign Private Advisers"]