USA Law and Practice Contributed by: Scott Naidech, Basil Godellas, Olga Loy and Beth Kramer, Winston & Strawn
jurisdiction by the filing of a document with a secretary of state or similar office. On 12 June 2025, the SEC formally withdrew virtually all proposed new rules related to investment manag - ers, including a proposed Rule 206 (4)-11 under the Advisers Act that would prohibit RIAs from outsourc - ing certain “covered functions”, a proposed rule that would have replaced the Custody Rule regarding the safeguarding of client assets, and a proposed rule to address conflicts of interest associated with the use of predictive data analytics by investment advisers. On 5 August 2025, FinCEN issued an order provid - ing exemptive relief for registered investment advisers and “exempt reporting advisers” until 1 January 2028 from certain anti-money laundering and other Bank Secrecy Act-related obligations. FinCEN stated that it intends to issue a notice of proposed rulemaking that could include substantive changes to the anti-money laundering rules that were originally effective from 1 January 2026. US alternative funds are predominantly established by US promoters and sponsors. Non-US advisers may also establish US funds for various purposes. In order to avoid integration of their US investment advisory activities with their global business operations, some non-US investment advisers may form separate US- affiliated investment advisers. 3.2 Legal Structures Used by Managers See Section 3.4 Tax Regime for Managers . 3.3 Regulatory Regime for Managers Registration Under the Advisers Act Section 202 (a)(11) of the Advisers Act generally defines an “investment adviser” to mean any person who, for compensation, engages in the business of advising others as to the value of securities or as to the purchase or sale of securities, or who, for com - pensation and as part of a regular business, issues analyses or reports concerning securities. 3. Fund Managers 3.1 Origin of Promoters/Sponsors of Alternative Funds
An adviser that falls within the definition of “invest - ment adviser” may have to register under the Advisers Act and be subject to its substantive requirements, unless an exemption applies (see 2.3 Disclosure/ Reporting Requirements ). Exemptions from Registration under the Advisers Act. Common exemptions from registration as an invest - ment adviser under the Advisers Act for private fund managers are as follows: • The private fund adviser exemption applies to advisers who solely manage private funds with less than USD150 million in assets under management in the United States. An adviser may be required to file as an exempt reporting adviser depending on its principal place of business and its regulatory assets under management. • The venture capital fund adviser exemption applies to advisers who advise solely venture capital funds. • The foreign private adviser exemption applies to non-US advisers with limited US client and investor bases (ie, less than USD25 million in assets under management from US clients and investors, and fewer than 15 such clients and investors). • The SBIC exemption applies to investment advis - ers who solely advise entities that have received from the Small Business Administration notice to proceed to qualify for a licence as a small business investment company under the Small Business Investment Act of 1958. Fiduciary Duties and Anti-fraud Protections An investment adviser (whether registered or unregis - tered) is a fiduciary with respect to all its clients. Advis - ers owe duties of loyalty and good faith to clients, and must act in accordance with those duties, including by providing full and fair disclosure of all material facts to current and prospective investors, and an affirma - tive duty to use reasonable care to avoid misleading clients. Section 206 of the Advisers Act contains broad “anti- fraud” provisions that make it unlawful for an invest - ment adviser to directly or indirectly engage in the following:
322 CHAMBERS.COM
Powered by FlippingBook