Press releases

Under the Securities and Exchange Commission’s (“SEC”) transition rule, every firm which was SEC registered on 1 January 2012 will need to file an amendment to its Form ADV with the SEC by 30 March 2012.

We therefore remind all firms that were SEC registered on 1 January 2012 that an updated Form ADV Part 1 and Form ADV Part 2A will need to be submitted to the SEC by 30 March 2012. The SEC’s newly defined “regulatory assets under management” should be based on the gross value of the assets as determined within 90 business days prior to the filing.

SEC 'no-action' letter

In December 2005, SEC staff issued a no-action letter (“2005 Staff Letter”) which set out its position on the registration of associated entities of an SEC registered investment adviser with respect to a private fund’s general partner, managing member or other special purpose vehicle (“SPV”). The 2005 Staff Letter stated that the SEC would not recommend enforcement action against a registered investment adviser and any related unregistered SPVs if certain conditions are met.

A recent no-action letter (“2012 No-Action Letter”) was issued by the SEC on 18 January 2012 which upheld the 2005 Staff Letter in relation to SPVs and expanded it to include SPVs with independent directors.

The 2012 No-Action Letter stated that the Form ADV was not designed to combine information about separately formed advisers that conduct different businesses, even where they are related to each other. However, for multiple entities in a control relationship, the SEC recognises that it may be appropriate for advisers to use a single registration provided they conduct a single advisory business.

When deciding whether multiple entities are conducting a single advisory business, firms need to consider a number of issues, such as whether each relying adviser is subject to the filer’s supervision and control, including operating under a single code of ethics and a single set of written compliance policies and procedures implemented and adopted in accordance with Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Advisers Act”) and administered by a single chief compliance officer in accordance with the rule, and whether each adviser advises only private funds and separate account clients that are qualified clients. Each adviser would therefore be subject to relevant SEC rules and could be examined by the SEC. As such, relying advisers should consider how reliance on this guidance would affect their compliance obligations under the Advisers Act.

Please note, that the guidance specifically addresses a filing adviser with its principal office and place of business in the US, which means that a non-US adviser will not be able to rely on the 2012 No-Action Letter and file a single Form ADV for itself and its relying advisers. However, a US-based adviser with non-US affiliates would be able to include its non-US advisory affiliates on its Form ADV if all of the conditions of the 2012 No-Action Letter are met. We expect SEC staff to provide further interpretive guidance as to questions arising during the implementation of the Dodd-Frank Act and will keep you apprised going forward.

How we can help

Kinetic Partners can assist you in evaluating the application of the No-Action Letter to your advisory business. Please contact Don Babbitt (US), Jane Stoakes (UK), AnnMarie Croswell (Hong Kong) or your usual contact at Kinetic Partners if you wish to discuss this further.