SEC Staffer Cautions Private Funds Industry On Potential Broker Registration Issues

In a recent speech given to the ABA Trading and Markets Subcommittee, David W. Blass (Chief Counsel of the SEC's Division of Trading and Markets) focused on a number of activities commonly conducted by private fund advisers that, depending on how these activities are conducted, could raise potential broker registration issues under the Securities Exchange Act of 1934 (the '34 Act). Mr. Blass identified two areas that are of particular concern:

• capital-raising activities, particularly in circumstances (i) where employees of a private fund adviser may be compensated based on how successful they are in selling interests in the adviser's funds, or (ii) where an employee's sole or primary function is to sell interests in the adviser's funds; and