Non-US private equity firms that manage funds outside the US are eligible for exemption from registration requirements with the Securities and Exchange Commission – a “second, little known loophole”, according to placement and advisory firm Triago.
SEC compliance can cost $300,000 to $400,000
So far, the advisor said in a statement, most industry practitioners had only been aware that non-US firms with a minimal presence in the US (managing less than $25 million for fewer than 15 US-based LPs) would be eligible for a “foreign advisor” exemption from Dodd-Frank mandated SEC registration.
The second exemption – which would mean some fund managers with large US LP bases may not face registration requirements – was proposed in November. Under the “Private Fund Adviser” exemption non-US GPs are permitted to manage unlimited US-sourced capital so long as the firm has no US physical presence.
Under this exemption firms can avoid SEC registration but would still be subject to reporting requirements and SEC examination—but this meant “negligible monetary and manpower costs”, said Triago. If a fund manager has to register, however, SEC compliance can cost $300,000 to $400,000, the firm estimated.
Non-US firms unable to meet the registration exemptions must register with the SEC by 21 July.