SEC Finalizes Dodd-Frank Rules Affecting Non-U.S. Investment Advisers

The Private Fund Investment Advisers Registration Act of 2010: The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), which was signed into law July 21, 2010, effects changes to the Investment Advisers Act of 1940 (the "Act") that change the bases on which non-U.S. advisers will be subject to regulation by U.S. regulators. On June 16, 2011, the Securities and Exchange Commission ("SEC") released final rules to implement these provisions of Dodd-Frank (the "Adopting Release").¹

What will change: Currently, non-U.S. advisers with fewer than 15 U.S. clients are generally exempt from registration and recordkeeping requirements under the Act.² Advisers to private funds can generally count each fund as a single client; thus, most private equity and hedge fund managers are able to rely on this exemption. Dodd-Frank repealed this so-called "private adviser exemption" and replaced it with, among other things, (a) a "foreign private adviser exemption,"