USA—Regulatory framework for the offering of hedge fund securities
USA—Regulatory framework for the offering of hedge fund securities

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • USA—Regulatory framework for the offering of hedge fund securities
  • Registration exemptions
  • Investment Company Act
  • Section 12(g) of the Securities Exchange Act
  • Registration under the Investment Advisers Act

A hedge fund seeking to attract US investors is subject to various federal securities statutes and their related regulations, including the Securities Act 1933, as amended (Securities Act), the Investment Company Act 1940, as amended (ICA), the Securities Exchange Act 1934, as amended (Exchange Act), and the Investment Advisers Act 1940, as amended (Investment Advisers Act). Hedge funds are also subject to state regulation through state securities laws known as blue sky laws. In nearly all cases, a hedge fund will seek an exemption from registration under federal or state securities laws in order to avoid the additional expense and scrutiny caused by registration and the resulting ongoing reporting and compliance obligations. This Practice Note discusses the key statutes that counsel must be aware of and consult when advising a hedge fund offering its securities in the US.

Registration exemptions

The US Securities and Exchange Commission (SEC) has always understood that a private investment fund relying on Section 3(c)(1) (15 USCS § 80a–3) or Section 3(c)(7) of ICA 1940 to avoid registration thereunder must offer its securities in compliance with the so-called 'private placement exemption' provided by Section 4(a)(2) (15 USCS § 77d) of the Securities Act, as amended (renumbered from Section 4(2) by the Jumpstart Our Business Startups Act (112 P.L. 106) (JOBS Act)). Since the adoption of Regulation