So You Want to be a Mutual Fund Manager

May 09, 2013

So you are an investment adviser registered with the Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940, as amended (“Advisers Act”). You currently manage separate accounts and, perhaps, one or more private funds, but you are interested in getting into the registered fund business. As an SEC registered adviser, you have already adopted compliance policies and procedures pursuant to Rule 206(4)-7 of the Advisers Act and you are certainly eligible to advise a registered investment company. So you’re good to go? . . . Not so fast.

In addition to the business questions relating to managing a registered fund, which are significant, you will likely need to reorient your compliance policies and procedures from the principles-based approach that generally defines the Advisers Act to the more structured rules-based system under the Investment Company Act of 1940, as amended (the “Investment Company Act”). This article seeks to:

  • summarize the differing regulatory approaches of the Advisers Act and the Investment Company Act, while also showing how SEC rulemaking and the exercise of its regulatory and enforcement authority has made these two statutes more alike; and
  • provide a non-exhaustive list of certain compliance requirements that advisers will need to address to serve as an adviser to a registered fund.

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