Exempt reporting advisers (ERAs) are an oft-overlooked segment of the private funds industry despite comprising a meaningful subset of all investment advisers. Many fund managers choose to operate as ERAs because of the limited filing and compliance burdens compared to those of registered investment advisers (RIAs). Nevertheless, it remains important for ERAs to be aware of the compliance requirements to which they are subject, particularly to endure increasing SEC scrutiny and to facilitate a potential transition to RIA status in the future. Those and other topics were addressed in a recent National Venture Capital Association program featuring Vivek Pingili, director and private market specialist at ACA Compliance Group (ACA), and Tony Drenzek, special regulatory counsel at Proskauer Rose. This first article in a two-part series reviews ERAs’ compliance obligations, tips for maintaining an effective compliance program and key considerations for ERAs intending to transition to RIA status. The second article
will highlight recent SEC examination trends and focus areas particularly relevant for RIAs and ERAs employing illiquid strategies. For additional commentary from ACA, see our two-part series “ACA Identifies 12 Most Common Compliance Failings for U.K. Firms and How to Avoid Them”: Part One
(Sep. 17, 2019); and Part Two
(Sep. 24, 2019).