California has proposed a new exemption for registration of investment adviser to private funds meant to replace the interim regulations implemented as a stop gap measure by the State after the passage of Dodd-Frank on July 11, 2011. If adopted, the proposed rule would become effective sometime during the first half of 2012, and provide an exemption to a manager who:
- advises one or more private funds (namely a 3(c)(1) or 3(c)(7) fund);
- has not been subject to certain disciplinary actions relating to violation of the securities laws;
- pays the State’s registration and renewal fees ($125);
- only accepts “accredited investors” and only charges a performance fee to “qualified clients”;
- provides investors certain written disclosures about the services it provides, its duties, and other material information;
- obtains an annual independent audit of each private fund it manages and delivers such audit to each investor; and
- advisers must file each report required to be filed by an exempt reporting adviser pursuant to Rule 204-4 under the Investment Advisers Act of 1940, as amended.
Text of the proposed rule change can be found here: Proposed Changes Investment Adviser Registration_California
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