Are Hedge Funds Required To Register With The Sec

Non all hedge funds are bailiwick to investment counselor registration. To determine whether a fund needs to register, nosotros ask our clients the post-obit four questions:

ane. Volition the fund invest in "securities?"

2. What will exist the size of the fund?

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

iv. In what states will the investors be located?

does the fund invest in "securities?"

But funds that invest in securities are required to register equally an investment advisor. Funds that invest simply in commodities, futures, currencies, or certain real manor investments, for example, would non be subject to investment counselor registration.

The definition of a "security" is very expansive, and covers a broad range of investment instruments, schemes and structures. Fund sponsors should consult with an experienced securities attorney before last that a fund does not invest in securities.

does the fund manager manage more than $150 million?

A securities hedge fund manager that manages over $150 million is automatically required to annals every bit an investment advisor with the SEC. All other managers are subject to state regulation and, depending on the state, may exist subject field to registration.

in what country is the hedge fund manager physically located?

In nigh states, hedge funds that invest in securities and take less than $150 million nether direction must register as state investment advisors in the country where the primary operations of the fund manager are located (note establishing a business in a country where the managers are physically located, volition be disregarded and will take no effect on jurisdiction).

Several states, (including California, New York, Connecticut, Massachusetts, Florida, and many other primarily Eastern states) recognize a individual fund exemption, which exempts from registration managers that solely advise private funds. At the offset, hedge funds in these jurisdictions are exempt from registration both at the SEC and state level.

As discussed in our weblog mail (Who Tin can Invest in Hedge Funds?) funds that are subject to SEC or land registration can only accept performance compensation from "Qualified Clients," while funds that are not field of study to advisor registration may (subject field to limitations) accept investments from only "accredited investors"

Note that one time a fund in one of these jurisdictions passes the $25 million threshold, it will be required to file a truncated registration with the SEC, which entails much lighter disclosure than full registration.

In what states will the investors be located?

Many states require hedge fund investment managers to register in the state once a certain threshold of investors has been reached (normally five).

For example, in united states of america of Nevada (a land that currently does not recognize the individual fund exemption) a hedge fund director must register as an investment advisor with the State of Nevada once five or more than Nevada residents have invested in the fund.

INSTRUCTIVE RESOURCES

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Forming and Operating a Hedge Fund | an eBook

Written by the managing partner of Uppercase Fund Constabulary Grouping, Forming and Operating a Hedge Fund provides an in-depth guide to aid emerging hedge fund managers through the process of successfully structuring, launching, and raising majuscule for a domestic or offshore hedge fund. Throughout the eBook, information technology highlights pitfalls that fund sponsors should spotter for and suggests best practices to safely and effectively navigate the process of forming and operating a hedge fund.

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Capital Fund Law Group is a boutique investment law firm focused on advising emerging and established investment funds on all aspects of germination and operation. We provide anticipated flat-fee services for most of our engagements. Our legal team has extensive experience advising hedge funds, real estate funds and private equity funds throughout the United States in various structures and strategies. We also prepare debt and disinterestedness private placement offerings for companies in all major industry sectors.

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