The California Department of Corporations (the “DOC”) adopted an emergency amendment to its rules that effectively extends through January 17, 2012 the exemption from California adviser licensing requirements that is available to advisers currently able to rely on Section 203(b)(3) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). This exemption under the Advisers Act is often referred to as the “private adviser exemption.” The emergency amendment revises the California exemption so that it incorporates all the substantive conditions of the private adviser exemption and removes the reference in the exemption to Section 203(b)(3) of the Advisers Act, which will be eliminated from the Advisers Act effective July 21, 2011 pursuant to the Dodd‑Frank Act. (The California exemption in question also requires that either (a) the adviser have not less than $25 million in assets under management, or (b) the adviser’s only clients be venture capital companies, as defined in the exemption.)
In March 2011, the DOC issued a separate proposal, on which it has yet to take final action, that is designed to integrate the exemptions from California’s investment adviser licensing requirements with various aspects of the federal statutory and regulatory scheme of investment adviser oversight as modified by the Dodd-Frank Act and related SEC rulemaking. For a detailed discussion of the March 2011 proposal, see the March 24, 2011 Goodwin Procter Alert.