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The purpose of this paper is to summarize record‐keeping requirements for Securities and Exchange Commission (SEC)‐registered advisers of private investment companies, especially hedge funds.

Summarizes the important record‐keeping provisions of Rule 204‐2 under the Investment Advisers Act of 1940 (the Advisers Act) in categories including accounting records; records of orders to purchase and sell securities; written communications; documents supporting performance information; lists of discretionary accounts; powers of attorney; written contracts; codes of ethics; personal securities transactions; disclosure documents; client solicitation agreements; written policies and procedures; records for advisers with custody; investment supervisory or management services; proxy voting records; coded designation for certain clients; the time, place, and manner for retention of records; records for advisers exiting the business; duplicate records; records for nonresident advisers; records for advisers previously registered with a state; and hedge fund records.

Pursuant to new Rule 203(b)(3)‐2 under the Investment Advisers Act of 1940 (“Advisers Act”), most advisers of private investment companies, especially hedge funds, will be required to register with the SEC as investment advisers. Registered investment advisers must comply with the rules and regulations of the Advisers Act, including the recordkeeping requirements of Rule 204‐2 under the Advisers Act. Although the subject of recordkeeping is perhaps unexciting, recordkeeping is a key area of regulatory focus for the SEC and its examiners, particularly as they seek to gauge the adequacy of adviser compliance and internal controls.

A useful summary of record‐keeping requirements for hedge funds and other private investment companies.

This article takes a close look at the requirements of the 1940 Investment Advisors Act for both registered and unregistered investment advisors — such as hedge funds and private equity funds. It highlights the significant issues that arise from the regulation for unregistered funds that are considering the consequences of SEC registration. It also reviews briefly the requirements of the Act that are already applicable to unregistered investment advisors.

On October 26, 2004 the Securities and Exchange Commission (the “SEC”) adopted new rules and rule amendments under the Investment Advisers Act of 1940 (the “Advisers Act”) that will require most hedge fund managers to register with the SEC as investment advisers by February 1, 2006. The actions taken by the SEC will necessitate that hedge fund managers begin preparing for SEC registration at least four to six months in advance of registration. In light of these new rules, this article summarizes: The significant provisions of the Advisers Act that hedge fund managers will need to become familiar with; The SEC registration process that a hedge fund adviser will have to follow; The SEC inspection program and some practical tips that hedge fund advisers should consider implementing. Because the regulatory framework imposes a variety of obligations and prohibitions on hedge fund managers, who, up until now, have operated without significant regulatory oversight, we recommend that fund managers who are likely to become subject to the registration rules should, well in advance of the February 1, 2006 registration deadline, familiarize themselves with the legal and operational changes that will affect them and assemble the information they will need to commence and complete the registration process. This article is designed to introduce fund managers to that framework.

To explain a guidance update issued in February 2017 by the staff of the Division of Investment Management (Staff) at the US Securities and Exchange Commission (SEC) on how robo-advisers may meet their disclosure, suitability and compliance obligations under the Investment Advisers Act of 1940 (Advisers Act).

Examines the update’s guidance on three areas – the substance and presentation of disclosures, the provision of suitable investment advice, and the adoption and implementation of effective compliance programs – and then raises practical considerations for robo-advisers.

The update reflects the Staff’s increasing concern about the potential risks of the robo-adviser platform and provides a listing of key issues that the SEC’s Office of Compliance Inspections and Examinations (OCIE) – which recently added “electronic investment advice” as a new focus for its 2017 examinations – may zero in on when examining robo-advisory firms.

Robo-advisers should carefully review the Staff’s update to evaluate whether their firms’ operations address the guidance.

Practical advice from experienced securities regulatory lawyers.

The purpose of this paper is to analyze new SEC Rule 206(4)‐8 under the Investment Advisers Act of 1940 and discuss its practical implications.

The paper describes the new rule, the types of advisers and funds to which the rule applies, examples of topics on which advisers might make statements that run afoul of the new rule, the application of the rule to both existing and potential investors, the application of the rule beyond statements made in the context of a securities transaction, and the application of the rule to any conduct that is fraudulent, deceptive, or manipulative, including negligent conduct. The paper explains that the scope of the new rule extends beyond Section 34(b) under the Investment Company Act of 1940, that the rule creates no new fiduciary duty, and that it creates no new private right of action against fund advisers.

The new rule signals that the SEC continues to focus intently on the fund activities of both registered and unregistered investment advisers, in particular with respect to their unregistered funds.

The new rule is an indicator of the SEC's enforcement intentions. Advisers should review their compliance programs, particularly as they relate to communication and other interaction with current and prospective fund investors, in light of the new rule.

The paper provides an helpful rule description and practical guidance from experienced securities lawyers.

On September 29, 2003, the staff (“Staff”) of the Division of Investment Management of the U.S. Securities and Exchange Commission (the “SEC”) issued a report to the SEC entitled the “Implications of the Growth of Hedge Funds” (the “Report”). The Report recommends amending Rule 203(b)(3)‐1 of the Advisers Act to require a hedge fund manager to “look through” each existing client and count each of the hedge fund’s underlying beneficial owners as a “client” of the hedge fund manager for the purpose of determining whether an investment adviser has 15 or more clients and therefore must register under the U.S. Investment Advisers Act of 1940. Such a registration requirement effectively would increase the minimum investment requirement for a hedge fund. The Report does not necessarily support the argument that subjecting hedge funds to periodic examinations by the SEC will help in early detection of fraud and prevention of resulting investor losses. Despite the Staff’s intentions to identify distinctions between customary hedge fund vehicles and other types of investment funds, no clear hedge fund definition or standard was provided in the Report. As a result, there is a danger that the scope of new hedge fund regulations will be too broad

To alert investment advisers to changes to be implemented to the Securities and Exchange Commission’s (SEC’s) Form ADV requirements as of October 1, 2017. Form ADV is the SEC’s principal investment adviser registration form.

Explains new public disclosure reporting requirements for investment adviser separately managed accounts (SMA) businesses, assesses the new “umbrella registration rules” that will govern how related advisers are treated by Form ADV, outlines key changes to Form ADV on a provision-by-provision basis, summarizes various other technical additions to Form ADV, and examines new performance reporting record-keeping requirements.

The Form ADV amendments are significant. Investment advisers should be preparing for compliance ahead of the October 2017 compliance date. Information retrieval processes will need to be reviewed and tested against the new disclosure rules. Firms will want to coordinate with their clients to minimize surprises when client data (albeit on an aggregated basis) is made public. Firms that operate under umbrella registrations should check their eligibility against the new rules.

Practical and informative guidance from experienced investment adviser attorneys that consolidates the key provisions of which investment advisers should be aware under new SEC disclosure and recordkeeping requirements.

The purpose of this article is to explore what the author believes to be some of the key challenges facing hedge fund managers that are preparing for registration with the Commission under the Investment Advisers Act of 1940 (“Advisers Act”).

Discusses marketing issues, including promotional use of track records from predecessor firms, use of target returns, use of selected investment performance, explicit or implicit promises of low volatility, and promises of specific fund characteristics. Discusses protection and proper use of fund assets, including asset safeguarding policies and procedures, and allocating expenses to funds. Discusses managing material, non‐public information; valuation of fund assets; side letters; and compliance program requirements.

The impacts of the new requirements will be significant for many hedge fund managers. Unregistered hedge fund managers will soon become subject to the full scope of the Advisers Act, including detailed compliance program requirements, obligations, and restrictions with respect to marketing, affiliated transaction prohibitions and restrictions, custody requirements, books and records creation and retention obligations, and a broad array of other standard and situational requirements. The organizations that meet these challenges successfully will be those that understand their risk profiles, foster top‐down “cultures of compliance,” and dedicate sufficient human and other resources to develop appropriate compliance programs and to monitor and continuously evaluate their exposures to potential compliance issues.

Provides a useful discussion of what the author believes to be some of the most important regulatory concerns and challenges faced by hedge fund advisers as they prepare for a new regulated environment.

On October 26, 2004, the Securities and Exchange Commission (the “Commission” or the “SEC”) adopted a new rule and related amendments requiring, among other things, that hedge fund managers register with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) by February 1, 2006. In this article, we refer to the totality of the recent rulemaking as the “new rules.” The new rules and a lengthy interpretive release (the “Adopting Release”) were made available to the public on December 2, 2004.The new rules only slightly modify the text of the proposed rules published by the SEC on July 20, 2004. We will refer to the July 20, 2004 rules as the “proposed rules.” The proposed rules, which were opposed by two of the five SEC commissioners at the time they were announced, provoked a loud outcry and strong opposition. According to the Adopting Release, the SEC received 161 comment letters from investors, hedge fund managers, mutual fund managers, law firms, and others. Of these, only 36 supported the proposed rules, 83 argued against them, and the remainder presented a neutral view. The objections included “concerns about the costs of compliance under the new rule[s], questions about [SEC] effectiveness in preventing hedge fund fraud, and the potential intrusiveness of [SEC] oversight of hedge fund managers.”

To explain and analyze the SEC’s January 17, 2017 announcement of settlements with ten investment advisory firms related to charges that those firms violated Rule 206(4)-5, known as the “Pay-to-Play Rule,” of the Investment Advisers Act of 1940.

Explains the Pay-to-Play Rule, its applicability to investment advisers, the de minimis and returned contribution exceptions, and the Rule violations cited by the SEC, and draws conclusions for the benefit of registered investment advisers and exempt reporting advisers.

The settlement included censures, civil money penalties, and recovery of compensation earned for firms’ failure to abide by the Rule, most often involving relatively small contributions by single covered individuals.

In light of these settlements, registered investment advisers and exempt reporting advisers may wish to review the adequacy of their policies and procedures with respect to the Pay-to-Play Rule and the effectiveness of their implementation.

Practical analysis and guidance from an experienced lawyer with a specialty in investment management.