January 24, 2011
The SEC should be commended for resisting the conclusion drawn by least one other commenter that based on the foreign adviser exemption Congress intended for non-U.S. advisers with more than $25 million from US investors to register. Congress in fact created three exemptions from registration under the Advisers Act. These new exemptions apply to: (i) advisers (both domestic and foreign) solely to venture capital funds, without regard to the number of such funds advised by the adviser or the size of such funds (ii) advisers (both domestic and foreign) solely to private funds with less than $150 million in assets under management in the United States, without regard to the number or type of private funds advised and (iii) non-U.S. advisers with less than $25 million in aggregate assets under management from U.S. clients and private fund investors and fewer than 15 such clients and investors.
In particular, Congress in section 408 of the Dodd-Frank Act, which is codified in section 203(m) of the Advisers Act, directs the SEC to exempt from registration any investment adviser solely to private funds that has less than $150 million in assets under management in the United States. By including the words "in the United States" Congress must be presumed to have intended those words to have some purpose and effect that is consistent with their ordinary and plain meaning, and not be treated as meaningless. In interpreting the words to require that a non-U.S. adviser need only count private fund assets it manages from a place of business in the United States toward the $150 million asset limit under the exemption, the SEC is giving effect to the words chosen by Congress consistent with their ordinary meaning and intended purpose i.e. to regulate domestic and not foreign matters by focussing upon the primary market in which the adviser conducts its business rather than presuming the extra territorial application of US law. By adopting a very pragmatic and sensible jurisdictional approach to regulation, the Commission is appropriately recognizing general principles of international comity and the fact that activities of non-U.S. advisers outside the United States are less likely to implicate U.S. regulatory interests.