Commentary on SEC Letter Dated 8 April

A letter from the US Securities and Exchanges Commission (‘SEC’) to the North American Securities Administrators Association, sent on 8 April, provides an indication that the SEC will look to delay the deadline for firms required to register with the regulator in accordance with the Dodd Frank Act, from 21 July until the first quarter of 2012.

The letter, from Robert E. Plaze, Associate Director of the Division of Investment Management, anticipates that the SEC is still on track to release final rules implementing the provisions of Dodd Frank “in advance of July 21” – it is the requirement to register and comply that would be delayed. The Foreign Private Adviser Exemption will be available from 21 July.

Although not a formal statement by the SEC, the wording of the letter provides a strong signal that the registration requirements will be postponed. The letter states: “given the time needed for advisers to register and come fully into compliance with the obligations applicable to them once they are registered, we expect that the Commission will consider extending the date by which these advisers must register… until the first quarter of 2012.”

As firms will recall, one of the key elements of the Dodd Frank Act was to repeal the ‘private adviser exemption’ bringing many larger hedge funds within the scope of SEC registration; it also introduced a series of new exemptions such as the Private Fund Adviser Exemption (for advisers with less than $150m AUM in the US). For details please refer to Regulatory Roundup 19.

Although not stated explicitly in the letter, it is understood that the requirement to submit an amended Form ADV Part 1 for Exempt Reporting Advisers is likely to also be delayed until the first quarter of 2012. The initial deadline for firms required to submit an amended Form ADV Part 1 under the Exempt Reporting Adviser exemption was 21 August.