Provided that they meet certain criteria, venture capital funds are not required to be registered as an “investment company” by the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940 (the “Investment Company Act”). The Investment Company Act defines “investment company” to include any issuer which is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities. Venture capital funds would typically fall under this definition; however, most venture capital funds are
Continue Reading Venture Capital Funds: 3(c)(1) Funds vs. 3(c)(7) Funds3(c)(1)
“Qualified Client” Threshold Increasing to $2.1M
By Andrew Ledbetter on
Posted in VC Funds and Tax
The SEC has updated the net worth threshold for “qualified clients” from $2.0 million to $2.1 million, effective August 15, 2016.
Section 205 of the Investment Advisers Act of 1940, as amended (the “Advisers Act”) generally prohibits a registered investment adviser from entering into an advisory contract that provides for compensation to the adviser on the basis of a share of capital gains upon or capital appreciation of funds of an advisory client. This prohibition on “performance-based fees” prohibits compensation arrangements commonly used in fund vehicles, such as “carry”…
Continue Reading “Qualified Client” Threshold Increasing to $2.1M