Last August, the Securities and Exchange Commission adopted amendments to Form ADV, the form used by investment advisers to register with the SEC and with the states. Included in these amendments were changes to allow multiple private fund adviser entities operating a single advisory business to file one Form ADV. These changes formalized prior staff guidance permitting "umbrella registration". See American Bar Association, Business Law Section, SEC Staff Letter (Jan. 18, 2012). The SEC gave the following rationale for umbrella registration in the adopting release:
For a variety of tax, legal and regulatory reasons, advisers to private funds may be organized as a group of related advisers that are separate legal entities but effectively operate as - and appear to investors and regulators to be - a single advisory business. Although these separate legal entities effectively operate as a single advisory business, Form ADV was designed to accommodate the registration request of an adviser structured as a single legal entity. As a result, private fund advisers that operated as a single advisory business but were organized as separate legal entities may have had to file multiple registration forms, even though the registration effectively was for the same advisory business. Multiple Form ADVs for a single advisory business may distort the data we collect on Form ADV and use in our regulatory program, be less efficient and more costly for advisers, and may be confusing to the public researching an adviser on our website.
Umbrella registration, however, isn't available to just any adviser. The SEC imposed essentially the same conditions to umbrella registration under the rule as had the prior staff guidance. One of these conditions is that the filing adviser and each relying adviser advise "only private funds and clients in separately managed accounts that are qualified clients (as defined in rule 205-3 under the Advisers Act) and are otherwise eligible to invest in the private funds advised by the filing adviser or a relying adviser and whose accounts pursue investment objectives and strategies that are substantially similar or otherwise related to those private funds". As discussed in prior posts, a real estate fund that relies only on the Section 3(c)(5)(C) exclusion under the Investment Company Act is not a "private fund" as defined in Section 202(a)(29) of the Investment Advisers Act.