Private Fund Adviser Exemption Attorneys
Whether a manager of private funds can rely on an exemption from SEC registration, what exempt reporting adviser status requires, and what changes when the fund’s assets cross the threshold.
Section 203(a) of the Investment Advisers Act of 1940 makes registration the default for an investment adviser that uses the mails or interstate commerce in its business. For managers of private funds, two statutory exemptions and one statutory exclusion do most of the work: the private fund adviser exemption in Section 203(m), the venture capital fund adviser exemption in Section 203(l), and the foreign private adviser exclusion in Section 203(b)(3). An adviser relying on 203(l) or 203(m) is an exempt reporting adviser and still files Form ADV under Rule 204-4.
Industria Business Lawyers advises fund managers nationwide on whether an exemption is available, how to document reliance on it, and when registration becomes required. Every provision cited on this page was read from the United States Code or the Code of Federal Regulations on the date this page was last reviewed. A consultation is free.
The Exemptions and What Each Requires
The statute sets the exemption and the SEC’s rules define its terms. These are the provisions an analysis turns on.
The Private Fund Adviser Exemption
Section 203(m)(1) of the Advisers Act, 15 U.S.C. 80b-3(m)(1), directs the SEC to exempt from registration any investment adviser that acts solely as an adviser to private funds and has assets under management in the United States of less than $150,000,000. Rule 203(m)-1(a) implements this for an adviser with its principal office and place of business in the United States: the adviser must act solely as an investment adviser to one or more qualifying private funds and manage private fund assets of less than $150 million.
Non-United States Advisers
Rule 203(m)-1(b) applies the exemption to an adviser with its principal office and place of business outside the United States if the adviser has no client that is a United States person except for one or more qualifying private funds, and all assets managed at a place of business in the United States are solely attributable to private fund assets with a total value of less than $150 million.
The Venture Capital Fund Adviser Exemption
Section 203(l)(1), 15 U.S.C. 80b-3(l)(1), provides that no investment adviser that acts as an investment adviser solely to one or more venture capital funds is subject to the registration requirements of the Act with respect to the provision of investment advice relating to a venture capital fund. The section also directs the SEC to require such advisers to maintain records and provide reports.
What Counts as a Venture Capital Fund
Rule 203(l)-1(a) defines a venture capital fund as a private fund that: (1) represents to investors that it pursues a venture capital strategy; (2) immediately after acquiring any asset other than qualifying investments or short-term holdings, holds no more than 20 percent of its aggregate capital contributions and uncalled committed capital in non-qualifying investments; (3) does not incur leverage in excess of 15 percent of aggregate capital contributions and uncalled committed capital, and only for a non-renewable term of no longer than 120 calendar days, subject to an exception for guarantees of a portfolio company’s obligations; (4) issues only securities that do not give holders a right to withdraw, redeem, or require repurchase except in extraordinary circumstances; and (5) is not registered under the Investment Company Act and has not elected business development company status.
Exempt Reporting Adviser Filings
Rule 204-4(a) provides that an adviser relying on the exemption under Section 203(l) or 203(m) must complete and file reports on Form ADV by following the Form’s instructions, which specify the information an exempt reporting adviser provides. Rule 204-4(b) requires electronic filing through the Investment Adviser Registration Depository, and Rule 204-4(d) requires payment of a filing fee to FINRA as the operator of the IARD before the filing is accepted.
The Foreign Private Adviser Exclusion
Section 203(b)(3) provides that the registration requirement does not apply to a foreign private adviser. Section 202(a)(30), 15 U.S.C. 80b-2(a)(30), defines that term as an adviser that has no place of business in the United States, has in total fewer than 15 clients and investors in the United States in private funds it advises, has aggregate assets under management attributable to United States clients and investors of less than $25,000,000, and neither holds itself out generally to the public in the United States as an investment adviser nor advises a registered investment company or business development company. Rule 202(a)(30)-1 sets the counting conventions for clients.
How the Asset Test Is Applied
The threshold is a defined number, measured a defined way, on a defined schedule.
What is counted. Rule 203(m)-1(d)(1) defines assets under management for purposes of the exemption as the regulatory assets under management determined under Item 5.F of Form ADV, with stated exclusions for certain funds described in Section 203(b)(7). The private fund assets figure is therefore tied to the same calculation the adviser reports on the Form, not to a separate valuation.
When it is counted. Rule 203(m)-1(c) requires private fund assets to be calculated annually, in accordance with General Instruction 15 to Form ADV. The annual calculation is the point at which an adviser learns whether it remains under the $150 million line.
Solely private funds. Both Rule 203(m)-1(a)(1) and (b)(1) require that the adviser act solely as an adviser to qualifying private funds, or, for a non-U.S. adviser, have no United States client other than qualifying private funds. A single separately managed account for a United States client takes the adviser outside the exemption regardless of asset size.
Venture capital funds counted separately. Rule 203(m)-1(d)(1)(i) excludes from the asset calculation the regulatory assets under management attributable to a fund described in Section 203(b)(7)(A), (B), or (C), which addresses how certain small business investment company assets interact with the threshold.
State law. An exemption from SEC registration under Section 203 addresses federal registration. State investment adviser statutes are reviewed separately for each state in which the adviser has a place of business or clients.
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How We Handle an Exemption Analysis
Every fund, account, and advisory relationship the manager has, with the domicile of each and the status of each investor.
Regulatory assets under management computed under Item 5.F of Form ADV for the private funds, with the exclusions in Rule 203(m)-1(d) applied.
Section 203(m), Section 203(l), or Section 203(b)(3) matched to the facts, with the reason for the choice recorded.
For a 203(l) adviser, each fund tested against the five elements of Rule 203(l)-1(a), including the 20 percent non-qualifying investment limit and the 15 percent leverage limit.
The exempt reporting adviser items of Form ADV prepared and filed through the IARD under Rule 204-4.
Each state in which the adviser has a place of business or clients reviewed for its own registration or notice requirements.
The annual asset calculation under Rule 203(m)-1(c) calendared, with a registration plan ready if the threshold is crossed.
FAQ
01 • Fund Managers Do I have to register with the SEC if I only manage one small private fund?
Section 203(m) directs the SEC to exempt an adviser that acts solely as an adviser to private funds and has assets under management in the United States of less than $150 million. Rule 203(m)-1 states the conditions. An adviser that meets them is an exempt reporting adviser and files Form ADV under Rule 204-4 rather than registering.
02 • Fund Managers What is an exempt reporting adviser?
An adviser relying on the exemption in Section 203(l) or 203(m). Rule 204-4(a) requires such an adviser to complete and file reports on Form ADV by following the Form’s instructions, and Rule 204-4(b) requires the filing to be made electronically through the IARD.
03 • Fund Managers How is the $150 million measured?
Rule 203(m)-1(d)(1) ties it to the regulatory assets under management determined under Item 5.F of Form ADV, and Rule 203(m)-1(c) requires the calculation to be made annually in accordance with General Instruction 15 to Form ADV.
04 • Fund Managers What makes a fund a venture capital fund for the 203(l) exemption?
Rule 203(l)-1(a) sets five elements: a represented venture capital strategy, no more than 20 percent in non-qualifying investments, leverage limited to 15 percent for no more than 120 days, no redemption rights except in extraordinary circumstances, and no registration under the Investment Company Act or election of business development company status.
05 • Fund Managers Does the SEC exemption cover state registration?
The exemptions in Section 203 address registration with the SEC. State investment adviser laws are separate and are reviewed for each state in which the adviser has a place of business or clients.
Fund managers nationwide. Call (202) 860-1210 or describe your funds and investors through the form. Free consultation. Every analysis is documented against the rule text in force.
This page provides general information about exemptions from investment adviser registration under the Investment Advisers Act of 1940 and does not constitute legal advice. Reading it does not create an attorney-client relationship with Industria Business Lawyers. Whether an exemption is available depends on the adviser’s facts and the rules in force. Provisions cited were read on September 23, 2026 from the United States Code and the Code of Federal Regulations.