13.5 Exempt Reporting Advisers

Exempt Reporting Advisers (ERAs)

The Dodd-Frank Act created categories of advisers who are exempt from SEC registration but must still file reports and remain subject to SEC oversight. These are called Exempt Reporting Advisers (ERAs).

Overview of ERA Status

SEC Registration: Not required.

Form ADV Filing: Required (abbreviated version).

SEC Examination Authority: Subject to SEC examination.

Recordkeeping: Must maintain books and records.

Antifraud Provisions: Fully applicable.

On the Exam: ERAs are NOT registered with the SEC, but they ARE subject to SEC oversight and must file Form ADV.

Private Fund Adviser Exemption

Qualification Requirements

Client Type: Advises only private funds (3(c)(1) or 3(c)(7) funds).

AUM Threshold: Less than $150 million in U.S. private fund AUM.

Principal Office: United States.

Private Fund Definition

3(c)(1) Fund: 100 or fewer beneficial owners.

3(c)(7) Fund: Only "qualified purchasers" as investors.

Not Publicly Offered: Exempt from Investment Company Act registration.

Foreign Adviser Consideration

Foreign advisers can use this exemption if:

No place of business in the U.S.

Only U.S. clients are private funds.

Less than $150 million in U.S. private fund AUM.

Venture Capital Fund Adviser Exemption

Qualification Requirements

Client Type: Advises only "qualifying venture capital funds".

AUM Threshold: No threshold, unlimited AUM.

Fund Requirements: Must meet venture capital fund definition.

Qualifying Venture Capital Fund

Strategy: Represents itself as pursuing VC strategy.

Investment Composition: At least 80% in qualifying investments.

Leverage: Limited borrowing (15% of capital).

Redemption Rights: Limited investor redemption rights.

Not a Registered Investment Company: Cannot be registered under 1940 Act.

Qualifying Investments for VC Funds

Included: Equity securities of qualifying portfolio companies.

Included: Equity-linked securities issued by portfolio companies.

Included: Short-term holdings pending investment.

Not Included: Publicly traded securities.

Not Included: Debt instruments.

Not Included: Real estate.

Foreign Private Adviser Exemption

This is a true exemption (no Form ADV filing required):

No U.S. Place of Business: No office or presence in U.S.

Fewer Than 15 U.S. Clients: Clients AND investors in funds.

Less Than $25 Million U.S. AUM: Assets managed for U.S. persons.

No Holding Out: Does not hold itself out as adviser in U.S.

ERA Filing Requirements

Form ADV for ERAs

Items 1, 2, 3, 6, 7, 10, 11, and DRPs: Must complete.

Annual Updates: Within 90 days of fiscal year-end.

Amendment Triggers: Material changes require update.

IARD Fee: $150 annually (as of 2026).

Ongoing Obligations

Books and Records: Must maintain as if registered.

Examination: Subject to SEC inspection.

Antifraud Rules: Fully applicable.

Pay-to-Play Rules: May apply.

State De Minimis Exemption

For state registration purposes:

No Place of Business: In the state.

Client Limit: 5 or fewer clients (other than institutional clients) in past 12 months.

Variations by State

Most States: 5 clients de minimis.

Some States: Different client thresholds.

Institutional Exemptions: Some states exempt advisers to institutions.

Transitioning from ERA to Registered Adviser

When Registration Required

Exceed $150M AUM: Private fund adviser must register with SEC.

Advise Non-VC Fund: VC adviser may lose exemption.

15+ U.S. Clients: Foreign adviser may need to register.

Transition Timing

Exceed Threshold: Within 90 days of annual filing showing excess.

Lose Exemption: Reasonable time to file registration.

Key Takeaways

1. ERAs are exempt from registration but must file abbreviated Form ADV.

2. Private fund exemption: only private funds + under $150M U.S. AUM.

3. VC fund exemption: only qualifying VC funds, no AUM limit.

4. Foreign private adviser: true exemption, no filing required.

5. State de minimis: no place of business + 5 or fewer clients in state.