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pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

The SEC has now finalized the rules implementing the Investment Advisers Act of 1940 (the “Advisers Act”) changes, which had been issued in proposed form near the end of 2010 following passage of the Dodd-Frank Act earlier that summer.  These rules went into effect July 21, 2011.  Fund managers who become obligated to register must do so by March 30, 2012 by filing their applications on or prior to February 14, 2012.

We are covering these new rules in the following series of posts:

  1. Venture Capital Fund Exemption (and grandfather rules)
  2. Private Fund Advisers Exemption (Less Than $150 Million AUM in U.S.)
  3. Foreign Private Adviser Exemption (This Article)
  4. Family Office Exemptions
  5. Reporting Requirements of Exempt Fund Managers and Related Rules

This article addresses the Foreign Private Adviser Exemption.  For any foreign fund managers reading this article – don’t get your hopes up, the exemption is very limited.  The requirements are very restrictive and we expect that very few foreign fund managers will be able to qualify. 

A significant benefit for those fund managers who do qualify for this exemption, and one of the key differences between this exemption and either the VC fund exemption (#1 above) or the Private Fund Adviser Exemption (#2 above), is that fund managers exempt under the Foreign Private Adviser Exemption have no exempt adviser reporting requirements (#5 above).Continue Reading Foreign Fund Manager Exemption (under $25M AUM in US) from Registration under the Advisers Act (Final Dodd-Frank Act Rules)

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

The SEC has now finalized the rules implementing the Investment Advisers Act of 1940 (the “Advisers Act”) changes, which had been issued in proposed form near the end of 2010 following passage of the Dodd-Frank Act earlier that summer.  These rules went into effect July 21, 2011.  Fund managers who become obligated to register must do so by March 30, 2012 by filing their applications on or prior to February 14, 2012.

We are covering these new rules in the following series of posts:

  1. Venture Capital Fund Exemption (and grandfather rules)
  2. Private Fund Advisers Exemption (Having Less Than $150 Million AUM in U.S.) (This Article)
  3. Foreign Private Adviser Exemption
  4. Family Office Exemptions
  5. Reporting Requirements of Exempt Fund Managers and Related Rules

This article addresses the private fund adviser exemption, for which fund managers may qualify if they are investment advisers solely to private funds, with less than $150 million in assets under management (“AUM“) in the United States.  These requirements are detailed below. 

As noted in #5 above, even exempt advisers will be subject to some reporting requirements including basic identifying information about the fund manager and its owners and about the private funds it manages.  In addition, even exempt advisers may be subject to state registration, depending on their jurisdiction.Continue Reading Private Fund Adviser Exemption (under $150M AUM) from Registration under the Advisers Act (Final Dodd-Frank Act Rules)

Courtesy of Itai Nevo, a partner in DLA Piper’s Boston office, below is an informal survey of current trends regarding single vs. double trigger stock option acceleration from DLA Piper’s Atlanta, Boston, Chicago, DC, Northern and Southern California, Reston, Seattle and Texas offices.

(1)  The common denominator (with some exceptions described below) was a double trigger approach – typically 12 months, sometimes 18 months, following a sale event. This was the most common approach (as opposed to single trigger) both geographically (East vs. West Coast) and across stages of company maturity (i.e., seed  stage through VC-backed).

(2)  For the most part (see item 3 below), acceleration terms were offered only to senior management and on an agreement-basis rather than at the option plan level. When offered, full acceleration was the most common approach with a recent slight trend toward 50-75% acceleration of unvested shares at the time of termination.

(3)  Rank and file acceleration was not overly common. Some Northern California- and Boston-based partners reported seeing an emerging trend in affording vesting acceleration (generally double trigger) for rank and file employees. If acceleration is in fact offered, rank and file participants often got six to12 months or some partial percentage.Continue Reading Trends re Stock Option Acceleration: Single vs. Double Trigger

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

The SEC has now finalized the rules implementing the Investment Advisers Act of 1940 (the “Advisers Act”) changes, which had been issued in proposed form near the end of 2010 following passage of the Dodd-Frank Act earlier that summer.  These rules went into effect July 21, 2011.  Fund managers who become obligated to register must do so by March 30, 2012 by filing their applications on or prior to February 14, 2012.

We are covering these new rules in the following series of posts:

  1. Venture Capital Fund Exemption (and grandfather rules) (This Article)
  2. Private Fund Advisers Exemption (Having Less Than $150 Million in Assets Under Management)
  3. Foreign Private Adviser Exemption
  4. Family Office Exemption
  5. Reporting Requirements of Exempt Fund Managers

Continue Reading Venture Capital Fund Exemption from Registration under the Advisers Act (Final Dodd-Frank Act Rules)

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

The SEC has now finalized the rules implementing the Investment Advisers Act of 1940 (the “Advisers Act”) changes, which had been issued in proposed form near the end of 2010 following passage of the Dodd-Frank Act earlier that summer.  These rules went into effect July 21, 2011.  Fund managers who become obligated to register must do so by March 30, 2012 by filing their applications on or prior to February 14, 2012.

As we’ve discussed previously on this blog, the new Advisers Act rules will require many more…

Continue Reading SEC Finalizes Investment Adviser Rules under Dodd-Frank (Updated)

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

Now is the time for US persons to complete and file their FBARs for 2010, or to confirm their entitlement to an extended due date (for 2010 or a prior year). 

By way of background, US persons need to make an annual filing with the Department of the Treasury to report a “foreign financial account” in which they have a financial interest, or over which they have signature authority, when the aggregate value of the account or accounts exceeds $10,000 (Form TD 90-22.1, Report of…

Continue Reading FBAR Reporting Deadline Looms on June 30th for Many Foreign Account Holders

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

The National Venture Capital Association (NVCA) held its annual breakfast in Washington DC yesterday.  As part of the breakfast, Mark Heesen, President of the NVCA, provided some interesting thoughts regarding the state of the VC industry, which are summarized courtesy of Matt Gorra and Matt VanderGoot, corporate and securities attorneys in attendance at the breakfast: 

  • mark_heesen_106x160.jpgThe number of VC firms continues to contract; however, the majority of those that have fallen by the wayside the past few years are those with small fund sizes ($5-$25M).  There are

…
Continue Reading Update on the VC World from Mark Heesen of the NVCA

pic-asher.jpgCONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

The SEC announced yesterday that it will be holding an open meeting on June 22, 2011, evidently to discuss new proposed changes to the new Advisers Act rules pending under Dodd Frank.  For fund managers concerned about becoming subjected to Advisers Act registration once Dodd-Frank becomes effective, this should be welcome news, but it is not yet clear exactly what the SEC is proposing to change.  As readers of The Venture Alley know, we are still waiting for final rulemaking on the Dodd-Frank Act changes to the Adviser’s Act, including the venture capital fund exemption to registration, which were recently delayed.

Based on the SEC’s notice, it appears that there will be three new topics for discussion at this meeting:

  1. New rules/amendments to the Advisers Act that, apparently, would increase the exemption amount (above $150M?) and would address the reporting requirements currently proposed to be required of fund managers who qualify for exemption.
  2. Discussion regarding the proposed exemptions for managers of VC funds and of less than $150M, presumably including technical clarifications regarding some open questions under the proposed rules.
  3. Discussion regrding the “family office” exemption, which has, thus far, been tailored very narrowly.

The full SEC release is below.  Obviously, it’s not clear exactly what the SEC is planning but one hopes these proposals will expand the proposed exemptions and reduce needless registration requirements.  We will keep you posted on any further updates, as they’re made available.

For more information on these issues, please also visit our prior summaries and comments:

Continue Reading SEC to Revise Investment Adviser Rules under the Dodd-Frank Act?

A few months ago we posted an article entitled “Financing Your Startup: How to Sell Stock without Going to Jail.” Among other things, the post described a series of legal restrictions associated with raising funds legally. Although there have been many widely publicized calls to relax these restrictions over the past decade (such as this 2006 Report of the SEC’s Advisory Committee on Smaller Public Companies or this 2007 SEC Release), most of these efforts fizzled with no action. However, in connection with the Dodd-Frank Act reforms, there has recently been a notable resurgence of pressure to simplify rules regarding private company capital raising. This pressure has come from a variety of sources, most notably Congressman Darrell Issa (R-CA), Chairman of the House Oversight and Government Reform Committee. Recently, SEC Chairman Mary L. Schapiro, and Director of the SEC’s Division of Corporation Finance Meredith Cross, testified before the House Oversight and Government Reform Committee to discuss some of these topics. A transcript of their testimony can be found here.

The two issues that appear to be center stage are (1) relaxing the general solicitation prohibitions in private offerings and (2) increasing the 500-shareholder threshold for triggering reporting obligations under the Securities Exchange Act of 1934, as amended (the “1934 Act”).Continue Reading Potential Changes to the Private Financing Landscape