SEC Issues Interpretive Guidance On The Venture Capital Fund Adviser Exemption

On December 2, 2013, the SEC's Division of Investment Management issued a new "Guidance Update" that provides some important interpretive guidance on the exemption from registration under the Investment Advisers act of 1940 (the "Advisers Act") for certain venture capital fund advisers (the "VC Exemption"). In particular, the Guidance Update clarifies that certain structures and practices common in the venture capital fund industry will not impact the availability of the VC Exemption.

By way of background, the VC Exemption exempts from registration under the Advisers Act investment advisers whose business is limited solely to advising one or more venture capital funds ("VC Advisers").¹ To qualify as a "venture capital fund" for this purpose, Advisers Act Rule 203(l)-1 provides that a fund must be a private fund² that, among other things, holds not more than 20% of its aggregate called capital contributions and uncalled capital commitments (excluding cash and cash