Private Equity Fund Managers Would Be Exempt From Advisers Act Registration Under Pending Legislation

If enacted, pending House legislation – the Small Business Capital Access and Job Preservation Act – would exempt private equity fund managers from registering under the Investment Advisers Act of 1940 (Advisers Act). The House Financial Services Committee held a hearing on this legislation on March 16, 2011. As of the date of this article, no further action has been taken on the bill.

Many private equity fund advisers currently rely on the "private adviser" exemption from registration on the federal level, which applies where the adviser has fewer than 15 clients and does not hold itself out to the public as an adviser. Because each private equity fund usually counts as one client, a private equity fund manager can have up to 14 funds and still use this exemption at the federal level.