The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA) recently issued Frequently Asked Questions (FAQs) concerning the exemption provisions of SEC Rule 15c3-3, the Customer Protection Rule. Prior to this guidance, even if they did not meet all requirements for (k)(2)(i) or (k)(2)(ii) on the FOCUS Report, firms were choosing to file for a (k)(2)(i) if they did not have custody. To address this issue, the SEC released footnote 74 to allow these “Non-Covered Firms” to properly file for exemption under Rule 15c3-3.
Requirements for Exempt Reporting Advisers:
Exempt Reporting Advisers (“ERAs“) must submit to the SEC, and periodically update, a truncated version of the Form ADV. More specifically, ERAs must complete the following items of Part 1A of Form ADV:
The Dodd-Frank Act (“Dodd-Frank”) not only mandated the registration of countless investment advisers, but also introduced a new classification of advisory firm – the Exempt Reporting Adviser – that is exempt from registration under the Investment Advisers Act of 1940 (the “Advisers Act”). Exempt Reporting Advisers (“ERAs“) are investment advisers that are not required to register as an adviser with the SEC or state regulators, due to their status as an advisor to either: (i) private funds and having less than $150 million of assets under management; or (ii) qualifying venture capital funds.