boltKey takeaways
- A fund manager that is paid to advise funds investing in securities is an investment adviser under the Advisers Act; the question is whether it must register with the SEC, a state, or neither.
- SEC registration generally applies at $100 million or more in regulatory assets under management, with a buffer that requires registration at $110 million and allows advisers to stay registered until AUM falls below $90 million.
- Advisers solely to venture capital funds, and advisers solely to private funds with less than $150 million of AUM in the United States, can instead file as exempt reporting advisers.
- Registration brings a written compliance program and chief compliance officer, annual Form ADV updates within 90 days of fiscal year-end, custody, marketing and code-of-ethics rules, and Form PF once private fund AUM reaches $150 million.
- Regulatory AUM for private funds is gross and includes uncalled commitments, so managers often cross thresholds earlier than their NAV suggests.
A registered investment adviser (RIA) is a firm that gives advice about securities for compensation and is registered with the SEC or a state securities regulator under the Investment Advisers Act of 1940 or state law. For private fund managers, the management company or general partner that advises the funds is almost always an investment adviser; whether it must register with the SEC depends mainly on its regulatory assets under management and on whether it qualifies for the venture capital or private fund adviser exemptions. Registration brings a defined set of ongoing obligations, from a written compliance program to annual Form ADV updates and, at scale, Form PF.
Who is an investment adviser#
Section 202(a)(11) of the Advisers Act defines an investment adviser as a person who, for compensation, is in the business of advising others about the value of securities or the advisability of investing in, buying or selling securities. A private fund manager that selects portfolio investments and earns a management fee or carried interest fits squarely within that definition, because the fund invests in securities such as portfolio company stock, notes and fund interests.
The adviser is usually the management company, sometimes together with the general partner entity. Under SEC staff positions, related advisory entities that operate as a single business can generally register together on one Form ADV.
SEC, state or exempt: the basic decision#
The Advisers Act divides advisers between federal and state oversight by size, and then offers exemptions that are especially relevant to private fund managers.
The SEC registration thresholds#
Under section 203A and Rule 203A-1, the core lines are:
- Under $100 million of regulatory AUM: generally prohibited from SEC registration and registered with the state where the adviser has its principal office, unless an exemption from the prohibition applies (for example, advisers required to register in 15 or more states).
- $100 million to $110 million: may register with the SEC but is not required to.
- $110 million or more: must register with the SEC unless exempt.
- Once registered, an adviser need not withdraw until regulatory AUM falls below $90 million, and then files Form ADV-W within 180 days of fiscal year-end.
The exemptions private fund advisers use#
Two federal exemptions allow private fund managers to avoid SEC registration while still filing parts of Form ADV as exempt reporting advisers (ERAs):
- Venture capital fund adviser exemption (section 203(l)). Available to advisers that advise solely venture capital funds as defined in Rule 203(l)-1, with no AUM limit.
- Private fund adviser exemption (section 203(m) and Rule 203(m)-1). Available to advisers that advise solely private funds and have less than $150 million of private fund AUM in the United States.
ERAs file an initial Form ADV report and annual updates, are subject to SEC examination and the antifraud provisions, but do not have to adopt the full registered-adviser compliance program. State rules vary; some states require registration or impose their own conditions on advisers that are exempt at the federal level, so check the state of the principal office.
| SEC-registered adviser | Exempt reporting adviser | State-registered adviser | |
|---|---|---|---|
| Typical profile | $110M+ regulatory AUM, or a private fund adviser over $150M | Solely VC funds, or solely private funds under $150M | Under $100M, not relying on a federal exemption |
| Form ADV | Full Parts 1 and 2 | Limited items of Part 1 only | Per state requirements |
| Compliance program and CCO | Required | Not required by SEC rule | Per state rules |
| Form PF | If $150M+ private fund AUM | No | No |
| SEC examination | Yes | Yes | Generally state examination |
Calculating regulatory AUM#
Regulatory AUM is defined in the Form ADV instructions and differs from NAV in two ways that matter to fund managers:
- It is gross. Fund-level borrowings are not deducted.
- It includes uncalled commitments for private funds.
A worked example shows why this matters. Assume a manager closes Fund II at $140 million while Fund I has $45 million of gross assets and $5 million of uncalled commitments remaining.
| Fund | Gross assets | Uncalled commitments | Regulatory AUM |
|---|---|---|---|
| Fund I | $45M | $5M | $50M |
| Fund II (just closed) | $10M | $130M | $140M |
| Total | $190M |
If the funds are not all venture capital funds, the manager cannot rely on the venture capital exemption. With $190 million of private fund AUM it is also over the $150 million private fund adviser threshold, so it must register with the SEC, even though the combined NAV is only around $55 million. Advisers relying on the private fund adviser exemption that cross $150 million generally have a short transition period after the annual Form ADV update to complete registration, so the trigger should be modeled before a fund closes, not after.
What registration requires#
Registering is done by filing Form ADV through the IARD system. The SEC has 45 days to grant registration or begin proceedings to deny it. In practice, the compliance infrastructure needs to be in place on the effective date. The main ongoing obligations are:
Disclosure and filings#
- Form ADV Part 1 (regulatory information, including each private fund on Schedule D) and Part 2A (the plain-English brochure), with Part 2B brochure supplements for key personnel.
- Annual updating amendment within 90 days after fiscal year-end, plus prompt amendments when certain information becomes materially inaccurate.
- Form PF once the adviser and its related persons have $150 million or more in private fund AUM.
- Form 13F if the adviser exercises discretion over $100 million or more in certain publicly traded equity securities.
Rules that shape operations#
- Compliance rule (Rule 206(4)-7): written policies and procedures reasonably designed to prevent violations, a designated chief compliance officer, and a review at least annually of the program's adequacy and effectiveness.
- Custody rule (Rule 206(4)-2): most private fund advisers comply through the audit approach, distributing audited financial statements prepared under U.S. GAAP (or another basis the rule permits) to investors within 120 days of fiscal year-end (longer periods apply to funds of funds). This is the main reason registered advisers' funds are audited; see our article on fund audits.
- Marketing rule (Rule 206(4)-1): governs advertisements, testimonials, endorsements and especially performance presentation, including net-of-fee requirements.
- Code of ethics (Rule 204A-1): standards of conduct and personal trading reporting by access persons.
- Books and records (Rule 204-2): required records generally kept for five years.
- Pay-to-play (Rule 206(4)-5): limits on political contributions where the adviser manages or seeks public pension money.
- Performance fees (Rule 205-3): carried interest may be charged only to qualified clients. For contracts entered into on or after June 29, 2026, that means $1.4 million under management with the adviser or $2.7 million in net worth, or qualified purchaser status. For a 3(c)(1) fund, each investor is tested.
Fiduciary duty#
Above all, an adviser owes its clients a fiduciary duty of care and loyalty, enforced through section 206's antifraud provisions. This applies to registered and exempt advisers alike, and it is the backbone of SEC enforcement on fees, expenses and conflicts, particularly since the Private Fund Adviser Rules were vacated in 2024.
What is changing as of late 2026#
A few developments are worth tracking:
- AML program rule. FinCEN adopted a rule in 2024 that would bring registered investment advisers and exempt reporting advisers under Bank Secrecy Act program requirements. FinCEN has postponed its effective date to January 1, 2028 and said it intends to revisit the rule's scope. Many advisers still run investor AML and KYC checks because LPs, banks and administrators expect them.
- Form PF. The compliance date for the 2024 Form PF amendments is July 1, 2027, and an April 2026 proposal would raise the filing threshold to $1 billion.
- Qualified client definition. A September 2026 SEC proposal would replace the qualified client dollar tests with the accredited investor standard. It is a proposal, not a final rule.
How Privatis helps#
Registered advisers need records that tie together. Privatis provides a double-entry fund general ledger with period close, management fee calculation, NAV and portfolio valuations, and investor capital accounts, which feed regulatory AUM, Form ADV and Form PF data and the audited financial statements. The compliance filings calendar tracks Form ADV, Form PF and other deadlines, KYC/AML onboarding with risk scoring covers investor checks, and an audit trail of every change supports books-and-records and examination requests.
Registration thresholds and exemptions have detailed conditions and state-level variations, so confirm your status with counsel.