On May 11, 2016, the Securities Bureau of the Nebraska Department of Banking and Finance (NDBF) adopted a new administrative rule that excludes investment advisers to private funds from the definition of “investment adviser”. This means that an investment adviser who solely advises private funds will not be subject to Nebraska’s investment adviser books and records requirements among other requirements for state registered investment advisers.
Nebraska has now joined 11 states (MA, MI, TX, CA, WI, UT, IN, VA, WA, & RI) who have exempted an investment adviser to only private fund(s) from being required to register with the state securities regulator as a state registered investment adviser. This private fund investment adviser registration exemption applies only to entities that exclusively provide advice to private funds. (For a full definition of a private fund, see SEC Rule 203(m)-1.) Private fund advisors who are registered or required to be registered with the U.S. Securities and Exchange Commission (“SEC”) are not eligible for this exemption.
To receive this state investment adviser registration exemption the investment adviser must file an “exempt registered adviser” filing with the Securities Bureau of the Nebraska Department of Banking and Finance. This filing is an abbreviated version of the Form ADV. While private fund investment advisers are exempt from registering as investment advisers with Nebraska, they must meet the following requirements:
- The private fund’s investors must meet the definition of “qualified client” according to SEC Rule 205-3.
- The private fund adviser must disclose all services to be provided to the owner(s) of the private fund.
- The private fund adviser must obtain audited financial statements of each fund and deliver a copy of the financial statement to each owner of the fund on an annual basis.
Please understand this blog post is not a substitute for reading the administrative rule in its entirety. RIA Compliance Consultants encourages you to read the full text of this rule for all of its details and requirements. Contact your consultant if you have questions about what this rule means for your investment advisor firm.
Posted by Bryan Hill
Labels: Investment Advisor Registration, Massachusetts Investment Adviser, Private Funds, Texas Investment Advisor, Washington Investment Advisor, Wisconsin Investment Advisor