What is an exempt reporting adviser?

One exemption covers advisers solely to venture capital funds, as SEC Rule 203(l)-1 defines them. The other covers a US adviser that acts solely for private funds and manages less than $150 million of private fund assets, measured as regulatory assets under management and calculated each year. Such an adviser must file reports on Form ADV, which tell the SEC and the public who it is and what it runs, but rules written for registered advisers, such as the custody rule, do not apply to it.

Say a US manager advises only two private funds, with $60 million and $70 million of assets. Its $130 million is under the $150 million line, so it can file as an exempt reporting adviser instead of registering. Simple example. Terms vary by fund.

It tells investors how far the SEC’s rules reach a manager: an exempt reporting adviser files public reports but is outside much of the rulebook for registered advisers.