Dodd-Frank Title IV is a legislation that mandates the registration and record-keeping of investment advisers of private funds, such as hedge funds, with the government. Its purpose is to enable the government to monitor high-risk funds and safeguard investors. While certain advisers are exempt from these regulations, the majority must adhere to them. Additionally, the law establishes criteria for determining accredited investors and necessitates regular reviews to ensure the rules remain current. Enacted in 2011, the government continues to provide clarification and enforcement of these regulations.
Title IV of the Dodd-Frank Act outlines the registration and record-keeping obligations for investment advisers of private funds, such as hedge funds, to supply the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) with the necessary information to assess the systemic risk of these funds. This Title broadens the registration requirements to encompass most private funds, removes certain exemptions, and sets a standard for identifying accredited investors. For instance, private funds, including hedge funds, must register as investment advisers with the FDIC and maintain records of their activities. These records must contain details on assets under management, leverage usage, counterparty credit risk exposure, trading and investment positions, valuation policies and practices, asset types, side arrangements or letters, and trading practices. Investment advisers must also take measures to protect any assets under their control, including having the assets verified by an independent public accountant. The purpose of this Title is to strengthen the oversight and record-keeping of private funds, including hedge funds, to enable the FDIC to analyse the systemic risk of these funds. Investment advisers of private funds are required to register with the FDIC and provide and maintain records related to the fund’s activities. These records must include information that is in the public interest, for investor protection, or for the assessment of the systemic risk of that fund. The Title also establishes the requirements for investment advisers to register with state authorities and sets the standard for identifying accredited investors.
Dodd-Frank Title IV, also known as the Private Fund Investment Advisers Registration Act, is a section of the Dodd-Frank Wall Street Reform and Consumer Protection Act that regulates advisers to hedge funds and other private funds.
Advisers to hedge funds and other private funds with assets under management (AUM) exceeding $150 million are generally required to register with the Securities and Exchange Commission (SEC) under Dodd-Frank Title IV.
Yes, certain advisers may be exempt from registration, such as advisers solely to venture capital funds, advisers solely to private funds with AUM of less than $150 million, and advisers solely to small business investment companies.
Registered advisers are required to file Form ADV with the SEC, which provides information about the adviser’s business, ownership, clients, and disciplinary history. They are also required to periodically update this form.
Yes, registered advisers are required to provide certain disclosures to their clients, including information about their fees, conflicts of interest, and disciplinary history.
Registered advisers are required to maintain certain books and records, including client agreements, trade records, and communications related to their advisory business, for a specified period of time.
Yes, registered advisers are generally prohibited from charging performance-based fees to clients who are not “qualified clients,” as defined by the SEC.
Non-compliance with Dodd-Frank Title IV can result in enforcement actions by the SEC, including fines, penalties, and potential revocation of registration. It is important for advisers to ensure they are in compliance with the regulations.
Yes, registered advisers are subject to periodic examinations by the SEC to assess their compliance with Dodd-Frank Title IV and other applicable regulations.
Yes, registered advisers are required to file annual updates to their Form ADV and may also be required to file other reports or notices with the SEC, depending on their specific circumstances.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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