Alert March 20, 2012

SEC Staff Provides Guidance to Exempt Reporting Advisers on Reporting Special Purpose Entities in Form ADV

The staff of the SEC’s Division of Investment Management (the “Staff”) supplemented its “Frequently Asked Questions on Form ADV and IARD” (the “FAQ”) to include no-action relief under which an exempt reporting adviser (an “ERA”), i.e., an adviser relying on the venture capital fund adviser exemption under Section 203(l) of the Investment Advisers Act of 1940 (the “Advisers Act”) or the private fund adviser exemption under Section 203(m), may fulfill applicable reporting obligations under those exemptions for the general partner, managing member or similar special purpose entity (“SPE”) to a private fund over which the ERA has discretionary management authority by including the SPE in the ERA’s report on Form ADV.  The Staff’s relief is subject to the following conditions: (1) an SPE may not engage in activities that would cause the SPE to fall within the Advisers Act’s definition of  “investment adviser” other than hiring and firing the ERA; (2) the SPE may act as an SPE only for private funds or other pooled investment vehicles advised by the ERA or its “related persons” (as defined in Form ADV); and (3) the ERA’s report on Form ADV must include all the information regarding the SPE that would be included if the SPE filed a separate report on Form ADV.  The FAQ provides the following guidance about including an SPE’s information in the ERA’s report on Form ADV: (a) Schedules A and B should include an SPE’s executive officer and ownership information, identifying the SPE to which the officer and ownership information relates in the “Title or Status” column of Schedule A; and (b) responses to the questions in Form ADV should relate to and include all information concerning the ERA and each SPE being reported in the Form ADV.