USA Law and Practice Contributed by: Scott Naidech, Basil Godellas, Olga Loy and Beth Kramer, Winston & Strawn
the Advisers Act’s registration requirement (see 3.3 Regulatory Regime for Managers ). A sponsor that registers with the SEC as an investment adviser will be required to, among other things: • file a Form ADV with the SEC and keep it current by filing periodic amendments, including an annual amendment; • comply with the “brochure rule”, which requires most advisers to provide clients and prospective clients with information about the adviser’s busi - ness practices and its principals’ educational and business backgrounds (most advisers satisfy this requirement by providing part 2 of Form ADV); • maintain accurate and current books and records and be subject to inspection and examination by the SEC staff; • complete Form PF filings, which contain more detailed information on the funds it manages or advises, and which are required to be filed on an annual or quarterly basis or more frequently with respect to certain events; • adopt and maintain written policies and procedures that are reasonably designed to prevent viola - tions of the Advisers Act and related regulations and have a code of ethics governing employee behaviour (including personal trading reporting, and restrictions and enforcement of certain insider trading procedures); • comply with the Marketing Rule (see 3.3 Regula- tory Regime for Managers ); and • only charge performance-based fees (ie, carried interest) to investors that are “qualified clients” as defined in Rule 205-3 under the Advisers Act. CPOs and CTAs have specific filing and reporting requirements under the CEA, the CFTC’s rules and the rules of the NFA. Managers registered as CPOs must generally: • distribute monthly or quarterly account statements to pool participants within 30 days of month-end or quarter-end; • distribute an annual report to pool participants within 90 days of the pool’s fiscal year-end; and
independent selling agents and the fund will be mak - ing all sales, the broker-dealer registration requirement generally is not implicated, unless the issuer hires or otherwise employs marketing personnel whose com - pensation is tied to the sales made by them. See 4.7 Compensation and Placement Agents . ERISA Under the Employee Retirement Income Security Act’s (ERISA) Plan Asset Regulation, when “Benefit Plan Investors” acquire 25% or more of the equity interests in a fund, the Benefit Plan Investors are deemed to have an interest in the underlying assets of that invest - ment, unless the investment meets one of the excep - tions. These funds are typically referred to as “plan asset funds”. Individuals responsible for the invest - ment and management of plan asset funds are sub - ject to ERISA’s fiduciary responsibility provisions and certain prohibited transaction provisions under both ERISA and the U.S. Internal Revenue Code (“Code”). If these obligations are breached, the fund’s spon - sor and/or investment adviser can incur substantial liabilities and penalties. A Benefit Plan Investor is an (i) employee benefit plan subject to title I of ERISA; (ii) individual retirement accounts, Keogh Plans and other employee benefit plans that are not subject to ERISA but are subject to the prohibited transaction rules of Code §4975; and (iii) other entities the assets of which are deemed to be plan assets based on investment from entities listed in (i) and/or (ii) above. State Regulation Alternative funds and investment advisers will be required to comply with state securities laws (so- called “blue sky” laws) and related regulations, the application of which may (in part) be pre-empted by certain of the federal securities laws mentioned above. 2.3 Disclosure/Reporting Requirements An investment adviser or management company that falls within the definition of “investment adviser” under the Advisers Act generally must register with the SEC, unless it (i) is prohibited from registering under the Advisers Act because it has less than USD25 million of regulatory assets under management; (ii) has less than USD100 million of regulatory assets under manage - ment and is registered with and subject to examina - tion by a state; or (iii) qualifies for an exception from
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