April 5, 2015

Ongoing RIA Compliance

Filing the ADV and other registration documents is only the beginning of an RIA’s regulatory obligations. Following registration, RIAs and their representatives become subject to a network of complex compliance obligations.  This article touches briefly on a few of  the many components of RIA compliance, including: annual license renewals,  detailed record keeping,  investor disclosure, compliance/ethics manual issues, and preparing for audits. 

April 4, 2015

Hedge Fund Prime Broker/Custodian

A prime broker is a central broker through whom the fund executes most or all of its trades and who typically acts as custodian to the fund’s assets. When the hedge fund executes trades through other brokers, the prime broker works with the executing brokers to settle and transfer all assets through the prime broker.

April 3, 2015

Hedge Fund Documents

Your hedge fund attorney will prepare five core documents, which are necessary to launch the fund:

(i) a private placement memorandum, (ii) limited partnership agreement, (iii) subscription agreement, (iv) investment management agreement, and (v) management company operating agreement.

April 3, 2015

Who Can Invest in a Hedge Fund?

There are two standards of investor suitability that may apply to investment fund investors, depending whether the fund manager is required to be registered as an investment adviser: the “accredited investor” standard or the significantly higher “qualified client” standard.
April 2, 2015

Hedge Fund Manager Compensation

Hedge fund manager fees typically consist of (i) an annual management fee and (ii) a performance allocation, also referred to as incentive allocation, or carried interest. The latter is not technically a “fee,” but rather a capital allocation, as will be discussed. This blog post describes the role of both compensation components.
October 15, 2014

RIA Registration Overview

Individuals and entities that provide securities investment advice for compensation are subject to state and federal investment advisor regulations.  Anyone providing investment advice should consult an experienced investment management attorney to determine whether state or federal registration is required.

June 12, 2014

Form ADV Part 1

The central component of  state or SEC investment advisor registration is Form ADV.  Form ADV is divided into two parts, Part 1 and Part 2.  Part 1 is a form requiring specific answers to questions asked, while Part 2 requires a written disclosure in narrative format covering certain required topics, which is ultimately delivered to existing and prospective clients. 

June 12, 2014

Form ADV Part 2

Part 2 of Form ADV is a written disclosure statement required for federal and state investment advisor registration  Form ADV is divided into Part 1 and Part 2.  This articles discusses Form ADV Part 2.  See also our article discussing Form ADV Part 1.

January 15, 2014

Form D Filing

Form D is a federal notice of an exempt securities offering and is the only disclosure document that is required to be filed with the SEC. This document discloses biographical information about the offering, the company, use of proceeds, and the principals of the company.

November 6, 2013

Must a Hedge Fund Register as an Investment Advisor?

Not all hedge funds are subject to investment advisor registration. To determine whether a fund needs to register, we ask our clients the following four questions:

1.  Will the fund invest in “securities?”

2.  What will be the size of the fund?

3.  In what state is the fund management team physically located?

4. In what states will the investors be located?

September 30, 2013

Who Will Verify Accreditation Under Rule 506(c)?

The SEC’s adoption of Rule 506(c) to allow general advertising and solicitation for private placement offerings has left us with some questions of practicality. We know from Rule 506(c) that issuers must take “reasonable steps” to verify the accreditation status of investors.

August 15, 2013

SEC Adopts JOBS Act Lifting Ban on Advertising for Private Placements

On July 10 the SEC adopted the long-awaited final rules to implement sections of the JOBS Act to lift the ban on general advertising and solicitation for certain Regulation D private placement offerings (as well as 144 offerings).  At the same time, the SEC proposed new rules that, if adopted, will require additional regulatory burdens.