This section provides two ``hardship exemptions'' from the requirement to make Advisers Act filings electronically with the Investment Adviser Registration Depository (IARD).
(a) Temporary hardship exemption--(1) Eligibility for exemption. If you are registered or are registering with the Commission as an investment adviser and submit electronic filings on the Investment Adviser Registration Depository (IARD) system, but have unanticipated technical difficulties that prevent you from submitting a filing to the IARD system, you may request a temporary hardship exemption from the requirements of this chapter to file electronically.
(1) Eligibility for exemption. If you are registered or are registering with the Commission as an investment adviser and submit electronic filings on the Investment Adviser Registration Depository (IARD) system, but have unanticipated technical difficulties that prevent you from submitting a filing to the IARD system, you may request a temporary hardship exemption from the requirements of this chapter to file electronically.
(2) Application procedures. To request a temporary hardship exemption, you must:
(i) File Form ADV-H (17 CFR 279.3) in paper format with no later than one business day after the filing that is the subject of the ADV-H was due; and
(ii) Submit the filing that is the subject of the Form ADV-H in electronic format with the IARD no later than seven business days after the filing was due.
(3) Effective date--upon filing. The temporary hardship exemption will be granted when you file a completed Form ADV-H.
(b) Continuing hardship exemption--(1) Eligibility for exemption. If you are a ``small business'' (as described in paragraph (b)(5) of this section), you may apply for a continuing hardship exemption.
The period of the exemption may be no longer than one year after the date on which you apply for the exemption.
(2) Application procedures. To apply for a continuing hardship exemption, you must file Form ADV-H at least ten business days before a filing is due. The Commission will grant or deny your application within ten business days after you file Form ADV-H.
(3) Effective date--upon approval. You are not exempt from the electronic filing requirements until and unless the Commission approves your application. If the Commission approves your application, you may submit your filings to FINRA in paper format for the period of time for which the exemption is granted.
(4) Criteria for exemption. Your application will be granted only if you are able to demonstrate that the electronic filing requirements of this chapter are prohibitively burdensome or expensive.
(5) Small business. You are a ``small business'' for purposes of this section if you are required to answer Item 12 of Form ADV (17 CFR 279.1) and checked ``no'' to each question in Item 12 that you were required to answer.
Note to paragraph (b):
FINRA will charge you an additional fee covering its cost to convert to electronic format a filing made in reliance on a continuing hardship exemption. [65 FR 57449, Sept. 22, 2000; 65 FR 81738, Dec. 27, 2000, as amended at 68 FR 42248, July 17, 2003; 73 FR 4694, Jan. 28, 2008] Sec. 275.203(l)-1 Venture capital fund defined.
(a) Venture capital fund defined. For purposes of section 203(l) of the Act (15 U.S.C. 80b-3(l)), a venture capital fund is any private fund that:
(1) Represents to investors and potential investors that it pursues a venture capital strategy;
(2) Immediately after the acquisition of any asset, other than qualifying investments or short-term holdings, holds no more than 20 percent of the amount of the fund's aggregate capital contributions and uncalled committed capital in assets (other than short-term holdings) that are not qualifying investments, valued at cost or fair value, consistently applied by the fund;
(3) Does not borrow, issue debt obligations, provide guarantees or otherwise incur leverage, in excess of 15 percent of the private fund's aggregate capital contributions and uncalled committed capital, and any such borrowing, indebtedness, guarantee or leverage is for a non-renewable term of no longer than 120 calendar days, except that any guarantee by the private fund of a qualifying portfolio company's obligations up to the amount of the value of the private fund's investment in the qualifying portfolio company is not subject to the 120 calendar day limit;
(4) Only issues securities the terms of which do not provide a holder with any right, except in extraordinary circumstances, to withdraw, redeem or require the repurchase of such securities but may entitle holders to receive distributions made to all holders pro rata; and
(5) Is not registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), and has not elected to be treated as a business development company pursuant to section 54 of that Act (15 U.S.C. 80a-53).
(b) Certain pre-existing venture capital funds. For purposes of section 203(l) of the Act (15 U.S.C. 80b-3(l)) and in addition to any venture capital fund as set forth in paragraph (a) of this section, a venture capital fund also includes any private fund that:
(1) Has represented to investors and potential investors at the time of the offering of the private fund's securities that it pursues a venture capital strategy;
(2) Prior to December 31, 2010, has sold securities to one or more investors that are not related persons, as defined in Sec. 275.206(4)-2(d)(7), of any investment adviser of the private fund; and
(3) Does not sell any securities to (including accepting any committed capital from) any person after July 21, 2011.
(c) Definitions. For purposes of this section:
(1) Committed capital means any commitment pursuant to which a person is obligated to:
(i) Acquire an interest in the private fund; or
(ii) Make capital contributions to the private fund.
(2) Equity security has the same meaning as in section 3(a)(11) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(11)) and Sec. 240.3a11-1 of this chapter.
(3) Qualifying investment means:
(i) An equity security issued by a qualifying portfolio company that has been acquired directly by the private fund from the qualifying portfolio company;
(ii) Any equity security issued by a qualifying portfolio company in exchange for an equity security issued by the qualifying portfolio company described in paragraph (c)(3)(i) of this section; or
(iii) Any equity security issued by a company of which a qualifying portfolio company is a majority-owned subsidiary, as defined in section 2(a)(24) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(24)), or a predecessor, and is acquired by the private fund in exchange for an equity security described in paragraph (c)(3)(i) or (c)(3)(ii) of this section.
(4) Qualifying portfolio company means any company that:
(i) At the time of any investment by the private fund, is not reporting or foreign traded and does not control, is not controlled by or under common control with another company, directly or indirectly, that is reporting or foreign traded;
(ii) Does not borrow or issue debt obligations in connection with the private fund's investment in such company and distribute to the private fund the proceeds of such borrowing or issuance in exchange for the private fund's investment; and
(iii) Is not an investment company, a private fund, an issuer that would be an investment company but for the exemption provided by Sec. 270.3a-7 of this chapter, or a commodity pool.
(5) Reporting or foreign traded means, with respect to a company, being subject to the reporting requirements under section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), or having a security listed or traded on any exchange or organized market operating in a foreign jurisdiction.
(6) Short-term holdings means cash and cash equivalents, as defined in Sec. 270.2a51-1(b)(7)(i) of this chapter, U.S. Treasuries with a remaining maturity of 60 days or less, and shares of an open-end management investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8) that is regulated as a money market fund under Sec. 270.2a-7 of this chapter.
Note: For purposes of this section, an investment adviser may treat as a private fund any issuer formed under the laws of a jurisdiction other than the United States that has not offered or sold its securities in the United States or to U.S. persons in a manner inconsistent with being a private fund, provided that the adviser treats the issuer as a private fund under the Act (15 U.S.C. 80b) and the rules thereunder for all purposes. [76 FR 39702, July 6, 2011] Sec. 275.203(m)-1 Private fund adviser exemption.
(a) United States investment advisers. For purposes of section 203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its principal office and place of business in the United States is exempt from the requirement to register under section 203 of the Act if the investment adviser:
(1) Acts solely as an investment adviser to one or more qualifying private funds; and
(2) Manages private fund assets of less than $150 million.
(b) Non-United States investment advisers. For purposes of section 203(m) of the Act (15 U.S.C. 80b-3(m)), an investment adviser with its principal office and place of business outside of the United States is exempt from the requirement to register under section 203 of the Act if:
(1) The investment adviser has no client that is a United States person except for one or more qualifying private funds; and
(2) All assets managed by the investment adviser at a place of business in the United States are solely attributable to private fund assets, the total value of which is less than $150 million.
(c) Frequency of Calculations. For purposes of this section, calculate private fund assets annually, in accordance with General Instruction 15 to Form ADV (Sec. 279.1 of this chapter).
(d) Definitions. For purposes of this section:
(1) Assets under management means the regulatory assets under management as determined under Item 5.F of Form ADV (Sec. 279.1 of this chapter).
(2) Place of business has the same meaning as in Sec. 275.222-1(a).
(3) Principal office and place of business of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser.
(4) Private fund assets means the investment adviser's assets under management attributable to a qualifying private fund.
(5) Qualifying private fund means any private fund that is not registered under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8) and has not elected to be treated as a business development company pursuant to section 54 of that Act (15 U.S.C. 80a-53). For purposes of this section, an investment adviser may treat as a private fund an issuer that qualifies for an exclusion from the definition of an ``investment company,'' as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), in addition to those provided by section 3(c)(1) or 3(c)(7) of that Act (15 U.S.C. 80a-3(c)(1) or 15 U.S.C. 80a-3(c)(7)), provided that the investment adviser treats the issuer as a private fund under the Act (15 U.S.C. 80b) and the rules thereunder for all purposes.
(6) Related person has the same meaning as in Sec. 275.206(4)-2(d)(7).
(7) United States has the same meaning as in Sec. 230.902(l) of this chapter.
(8) United States person means any person that is a U.S. person as defined in Sec. 230.902(k) of this chapter, except that any discretionary account or similar account that is held for the benefit of a United States person by a dealer or other professional fiduciary is a United States person if the dealer or professional fiduciary is a related person of the investment adviser relying on this section and is not organized, incorporated, or (if an individual) resident in the United States.
Note to paragraph (d)(8):
A client will not be considered a United States person if the client was not a United States person at the time of becoming a client. [76 FR 39703, July 6, 2011] Sec. 275.203A-1 Eligibility for SEC registration; Switching to or from SEC registration.
(a) Eligibility for SEC registration of mid-sized investment advisers. If you are an investment adviser described in section 203A(a)(2)(B) of the Act (15 U.S.C. 80b-3a(a)(2)(B)):
(1) Threshold for SEC registration and registration buffer. You may, but are not required to register with the Commission if you have assets under management of at least $100,000,000 but less than $110,000,000, and you need not withdraw your registration unless you have less than $90,000,000 of assets under management.
(2) Exceptions. This paragraph (a) does not apply if:
(i) You are an investment adviser to an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a) or to a company which has elected to be a business development company pursuant to section 54 of the Investment Company Act of 1940 (15 U.S.C. 80a-54), and has not withdrawn the election; or
(ii) You are eligible for an exemption described in Sec. 275.203A-2 of this chapter.
(b) Switching to or from SEC registration--(1) State-registered advisers--switching to SEC registration. If you are registered with a state securities authority, you must apply for registration with the Commission within 90 days of filing an annual updating amendment to your Form ADV reporting that you are eligible for SEC registration and are not relying on an exemption from registration under sections 203(l) or 203(m) of the Act (15 U.S.C. 80b-3(l), (m)).
(1) State-registered advisers--switching to SEC registration. If you are registered with a state securities authority, you must apply for registration with the Commission within 90 days of filing an annual updating amendment to your Form ADV reporting that you are eligible for SEC registration and are not relying on an exemption from registration under sections 203(l) or 203(m) of the Act (15 U.S.C. 80b-3(l), (m)).
(2) SEC-registered advisers--switching to State registration. If you are registered with the Commission and file an annual updating amendment to your Form ADV reporting that you are not eligible for SEC registration and are not relying on an exemption from registration under sections 203(l) or 203(m) of the Act (15 U.S.C. 80b-3(l), (m)), you must file Form ADV-W (17 CFR 279.2) to withdraw your SEC registration within 180 days of your fiscal year end (unless you then are eligible for SEC registration). During this period while you are registered with both the Commission and one or more state securities authorities, the Act and applicable State law will apply to your advisory activities. [76 FR 43011, July 19, 2011] Sec. 275.203A-2 Exemptions from prohibition on Commission registration.
The prohibition of section 203A(a) of the Act (15 U.S.C. 80b-3a(a)) does not apply to:
(a) Pension consultants. (1) An investment adviser that is a ``pension consultant,'' as defined in this section, with respect to assets of plans having an aggregate value of at least $200,000,000.
(1) An investment adviser that is a ``pension consultant,'' as defined in this section, with respect to assets of plans having an aggregate value of at least $200,000,000.
(2) An investment adviser is a pension consultant, for purposes of paragraph (a) of this section, if the investment adviser provides investment advice to:
(i) Any employee benefit plan described in section 3(3) of the Employee Retirement Income Security Act of 1974 (``ERISA'') [29 U.S.C. 1002(3)];
(ii) Any governmental plan described in section 3(32) of ERISA (29 U.S.C. 1002(32)); or
(iii) Any church plan described in section 3(33) of ERISA (29 U.S.C. 1002(33)).
(3) In determining the aggregate value of assets of plans, include only that portion of a plan's assets for which the investment adviser provided investment advice (including any advice with respect to the selection of an investment adviser to manage such assets). Determine the aggregate value of assets by cumulating the value of assets of plans with respect to which the investment adviser was last employed or retained by contract to provide investment advice during a 12-month period ended within 90 days of filing an annual updating amendment to Form ADV (17 CFR 279.1).
(b) Investment advisers controlling, controlled by, or under common control with an investment adviser registered with the Commission. An investment adviser that controls, is controlled by, or is under common control with, an investment adviser eligible to register, and registered with, the Commission (``registered adviser''), provided that the principal office and place of business of the investment adviser is the same as that of the registered adviser. For purposes of this paragraph, control means the power to direct or cause the direction of the management or policies of an investment adviser, whether through ownership of securities, by contract, or otherwise. Any person that directly or indirectly has the right to vote 25 percent or more of the voting securities, or is entitled to 25 percent or more of the profits, of an investment adviser is presumed to control that investment adviser.
(c) Investment advisers expecting to be eligible for Commission registration within 120 Days. An investment adviser that:
(1) Immediately before it registers with the Commission, is not registered or required to be registered with the Commission or a state securities authority of any State and has a reasonable expectation that it would be eligible to register with the Commission within 120 days after the date the investment adviser's registration with the Commission becomes effective;
(2) Indicates on Schedule D of its Form ADV (17 CFR 279.1) that it will withdraw from registration with the Commission if, on the 120th day after the date the investment adviser's registration with the Commission becomes effective, the investment adviser would be prohibited by section 203A(a) of the Act (15 U.S.C. 80b-3a(a)) from registering with the Commission; and
(3) Notwithstanding Sec. 275.203A-1(b)(2) of this chapter, files a completed Form ADV-W (17 CFR 279.2) withdrawing from registration with the Commission within 120 days after the date the investment adviser's registration with the Commission becomes effective.
(d) Multi-state investment advisers. An investment adviser that:
(1) Upon submission of its application for registration with the Commission, is required by the laws of 15 or more States to register as an investment adviser with the state securities authority in the respective States, and thereafter would, but for this section, be required by the laws of at least 15 States to register as an investment adviser with the state securities authority in the respective States;
(2) Elects to rely on paragraph (d) of this section by:
(i) Indicating on Schedule D of its Form ADV that the investment adviser has reviewed the applicable State and federal laws and has concluded that, in the case of an application for registration with the Commission, it is required by the laws of 15 or more States to register as an investment adviser with the state securities authorities in the respective States or, in the case of an amendment to Form ADV, it would be required by the laws of at least 15 States to register as an investment adviser with the state securities authorities in the respective States, within 90 days prior to the date of filing Form ADV; and
(ii) Undertaking on Schedule D of its Form ADV to withdraw from registration with the Commission if the adviser indicates on an annual updating amendment to Form ADV that the investment adviser would be required by the laws of fewer than 15 States to register as an investment adviser with the state securities authority in the respective States, and that the investment adviser would be prohibited by section 203A(a) of the Act (15 U.S.C. 80b-3a(a)) from registering with the Commission, by filing a completed Form ADV-W within 180 days of the adviser's fiscal year end (unless the adviser then is eligible for SEC registration); and
(3) Maintains in an easily accessible place a record of the States in which the investment adviser has determined it would, but for the exemption, be required to register for a period of not less than five years from the filing of a Form ADV that includes a representation that is based on such record.
(e) Internet investment advisers. (1) An investment adviser that:
(1) An investment adviser that:
(i) Provides investment advice to all of its clients exclusively through an interactive website, except that the investment adviser may provide investment advice to fewer than 15 clients through other means during the preceding twelve months;
(ii) Maintains, in an easily accessible place, for a period of not less than five years from the filing of a Form ADV that includes a representation that the adviser is eligible to register with the Commission under paragraph (e) of this section, a record demonstrating that it provides investment advice to its clients exclusively through an interactive website in accordance with the limits in paragraph (e)(1)(i) of this section; and
(iii) Does not control, is not controlled by, and is not under common control with, another investment adviser that registers with the Commission under paragraph (b) of this section solely in reliance on the adviser registered under paragraph (e) of this section as its registered adviser.
(2) For purposes of paragraph (e) of this section, interactive website means a website in which computer software-based models or applications provide investment advice to clients based on personal information each client supplies through the website.
(3) An investment adviser may rely on the definition of client in Sec. 275.202(a)(30)-1 in determining whether it provides investment advice to fewer than 15 clients under paragraph (e)(1)(i) of this section. [62 FR 28133, May 22, 1997, as amended at 63 FR 39715, 39716, July 24, 1998; 65 FR 57450, Sept. 22, 2000; 67 FR 77625, Dec. 18, 2003; 76 FR 43012, July 19, 2011] Sec. 275.203A-3 Definitions.
For purposes of section 203A of the Act (15 U.S.C. 80b-3a) and the rules thereunder:
(a)(1) Investment adviser representative. ``Investment adviser representative'' of an investment adviser means a supervised person of the investment adviser:
(1) Investment adviser representative. ``Investment adviser representative'' of an investment adviser means a supervised person of the investment adviser:
(i) Who has more than five clients who are natural persons (other than excepted persons described in paragraph (a)(3)(i) of this section); and
(ii) More than ten percent of whose clients are natural persons (other than excepted persons described in paragraph (a)(3)(i) of this section).
(2) Notwithstanding paragraph (a)(1) of this section, a supervised person is not an investment adviser representative if the supervised person:
(i) Does not on a regular basis solicit, meet with, or otherwise communicate with clients of the investment adviser; or
(ii) Provides only impersonal investment advice.
(3) For purposes of this section:
(i) ``Excepted person'' means a natural person who is a qualified client as described in Sec. 275.205-3(d)(1).
(ii) ``Impersonal investment advice'' means investment advisory services provided by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts.
(4) Supervised persons may rely on the definition of ``client'' in Sec. 275.202(a)(30)-1 to identify clients for purposes of paragraph (a)(1) of this section, except that supervised persons need not count clients that are not residents of the United States.
(b) Place of business. ``Place of business'' of an investment adviser representative means:
(1) An office at which the investment adviser representative regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients; and
(2) Any other location that is held out to the general public as a location at which the investment adviser representative provides investment advisory services, solicits, meets with, or otherwise communicates with clients.
(c) Principal office and place of business. ``Principal office and place of business'' of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser.
(d) Assets under management. Determine ``assets under management'' by calculating the securities portfolios with respect to which an investment adviser provides continuous and regular supervisory or management services as reported on the investment adviser's Form ADV (17 CFR 279.1).
(e) State securities authority. ``State securities authority'' means the securities commissioner or commission (or any agency, office or officer performing like functions) of any State. [62 FR 28134, May 22, 1997, as amended at 63 FR 39715, July 24, 1998; 69 FR 72088, Dec. 10, 2004; 76 FR 43012, July 19, 2011] Sec. 275.203A-4 [Reserved] Sec. 275.203A-5 Transition rules.
(a) Temporary exemption from prohibition on Commission registration for mid-sized investment advisers. Until January 1, 2012, the prohibition of section 203A(a)(2) of the Act (15 U.S.C. 80b-3a(a)(2)) does not apply to an investment adviser registered with the Commission on July 21, 2011.
(b) SEC-registered advisers--Form ADV filing. Every investment adviser registered with the Commission on January 1, 2012 shall file an amendment to Form ADV (17 CFR 279.1) no later than March 30, 2012 and shall determine its assets under management based on the current market value of the assets as determined within 90 days prior to the date of filing the Form ADV.
(c) Mid-sized investment advisers--withdrawing from Commission registration.
(1) If an investment adviser registered with the Commission on January 1, 2012 would be prohibited from registering with the Commission under section 203A(a)(2) of the Act (15 U.S.C. 80b-3a(a)(2)), and is not otherwise exempted by Sec. 275.203A-2 from such prohibition, such investment adviser shall withdraw from registration with the Commission by filing Form ADV-W (17 CFR 279.2) no later than June 28, 2012. During this period while an investment adviser is registered with both the Commission and one or more state securities authorities, the Act and applicable State law will apply to the investment adviser's advisory activities.
(2) If, prior to the effective date of the withdrawal from registration of an investment adviser on Form ADV-W, the Commission has instituted a proceeding pursuant to section 203(e) of the Act (15 U.S.C. 80b-3(e)) to suspend or revoke registration, or pursuant to section 203(h) of the Act (15 U.S.C. 80b-3(h)) to impose terms or conditions upon withdrawal, the withdrawal from registration shall not become effective except at such time and upon such terms and conditions as the Commission deems necessary or appropriate in the public interest or for the protection of investors. [76 FR 43012, July 19, 2011] Sec. 275.203A-6 [Reserved]