In 2005 and 2006, the Securities and Exchange Commission tried — unsuccessfully — to bring the majority of hedge fund managers under its regulatory regime by making rule changes that would have forced hedge fund managers to register as investment advisers. The industry won that round, ultimately appealing and overturning the new rules in court. But this time, having been signed into law, the registration rule is here to stay. The recently signed “Dodd-Frank Wall Street Reform and Consumer Protection Act” will mandate SEC registration not only for hedge funds, but also for other types of private fund advisers, including private equity fund managers, multi-family offices, some commodity trading advisors and small business investment advisors.

The new law’s most important change for investment advisers to private funds is that it eliminates the current registration exemption for private investment advisers with fewer than 15 clients who don’t advise registered investment companies (RICs). In addition, since it raises the assets under management (AUM) threshold for SEC registration from $25 million to $100 million ($150 million for those that provide investment advisory services solely to private funds), it may also release many smaller firms from federal registration requirements, significantly changing the mix of federal and state registered firms.  Read More