USA Law and Practice Contributed by: Bill Sturman, Matthew Holt, Steven Starr and Cliff Cone, Clifford Chance
ing of interests in the fund is ongoing. Frequently, fund sponsors will avoid general solicitation by conducting the offering of interests in the fund so that the offering reaches only those who have a pre-existing relationship with the fund sponsor. Additionally, the fund sponsor will be prohibited from engaging in any advertising activity that could have the effect of conditioning the market or soliciting investors for the offering. Investment Company Act As noted in 2.2.3 Restrictions on Investors , an alternative fund may also be restricted to sell - ing interests solely to persons who are “quali - fied purchasers” depending on the exemption applicable to the fund. 2.3.8 Marketing Authorisation/Notification Process No authorisation or notification is required prior to marketing an alternative fund. 2.3.9 Post-Marketing Ongoing Requirements If an alternative fund has filed a Form D, it will be obligated to update the filing on an annual basis for so long as the fundraising continues, and more frequent updates may be necessary depending on whether there are material chang - es to the information contained therein. Some states may also require updates to be made to their state-level notice filings. Depending on the type of investment, some alternative funds may be subject to additional federal filing obligations. An investment adviser to an alternative fund that is registered with the SEC or is an ERA will be required to update its Form ADV on an annual basis (and more frequently if certain information changes). Certain registered investment advis - ers will also be required to file a Form PF with the SEC on a periodic basis, including informa -
tion about the private funds that they advise or manage. 2.3.10 Investor Protection Rules Generally, participation in alternative funds by US investors is restricted to investors that meet applicable sophistication requirements. These eligibility thresholds allow the alternative fund to avoid the burdensome registration requirements of the Securities Act and Investment Company Act (which provide heightened protection for retail investors). Depending on the type of invest - ment, some alternative funds may be subject to The SEC generally communicates via email or telephone with alternative fund sponsors; face- to-face meetings are uncommon. As alterna - tive funds are not directly regulated, the most common source of interaction with the regulator comes in the form of examinations of a fund’s investment adviser. Registered investment advisers are regularly examined by the SEC for compliance with federal securities laws. 2.4 Operational Requirements additional federal filing obligations. 2.3.11 Approach of the Regulator Broadly, there are no regulatory restrictions on the types of investments for alternative funds. However, an investment adviser to an alternative fund will be subject to certain provisions of the Advisers Act that may have operational impacts. For example: • An investment adviser has a fiduciary duty, comprised of a duty of loyalty and a duty of care, and must comply with this duty in its dealings with its clients (which, in the case of an advisory client that is an alternative fund, would be the fund itself rather than the investors in the fund). Careful attention must
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