Investment Adviser Guide

​​​​​​Private Fund Advisers

The Dodd Frank Wall Street Reform and Consumer Protection Act repealed section 203(b)(3) of the Investment Advisers Act of 1940, effective July 21, 2011, which had been relied upon by advisers to private funds and other investment advisers as the basis for an exemption from federal registration of investment advisers with fewer than fifteen clients. These changes mean that advisers to private funds will no longer be able to rely on the federal de minimis exemption from registration. Instead, advisers to private funds with assets over $150 million will have to register with the U.S. Securities and Exchange Commission (SEC) as investment advisers.

If the private fund adviser’s assets are under $150 million, the SEC has created a filing category called an Exempt Reporting Adviser. These advisers will file certain information on Form ADV with the SEC but not be an actual registrant. These advisers will be referred to as Exempt Reporting Advisers. These new regulations and exemptions apply only to advisers who only have private funds as clients. If the adviser has even one client that otherwise would require registration, the adviser is no longer eligible for the exemption and must be registered.

Wisconsin law had no equivalent to section 203(b)(3), but the Wisconsin Uniform Securities Act contained other exemption provisions; most notably for advisers to private funds, the institutional investor exemption found in Wis. Stat. s. 551.403(2)(a)2. Wisconsin also generally looks at a private fund as one customer rather than "looking thru" to the individual investors in the fund. With the elimination of the fifteen client exemption, the Division of Securities determined to bring its exemptions from registration in line with the federal regulations and secured changes to the definition of “institutional investor” as provided in Wis. Stat. s. 551.102(11)(k), (m) or (o)​. Many advisers to private funds used these and predecessor exemptions to avoid having to register as state investment advisers.

Private fund advisers with under $150 million of assets under management will be subject to the registration requirement of Wis. Stat. ch. 551 as other investment advisers are currently. The result for advisers under $150 million assets under management is that even one fund client (regardless of how many investors are in the fund) will trigger the registration requirement with the division.


On February 17, 2012, Wisconsin Department of Financial Institutions Division of Securities Administrator Patricia D. Struck signed a Final Order Granting Exemption from the Registration Requirements for Investment Advisers to Private Funds and Their Investment Adviser Representatives​. This Order establishes exemptions for certain private fund advisers with assets under management up to $150 million. 

Pursuant to the Order, advisers to private funds that qualify for the exclusion from the definition of an investment company under section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 or that meet the definition of a venture capital fund in SEC Rule 203(l)-1, do not need to be registered with the division if all of the following conditions are met:

  1. Neither the private fund adviser nor any of its advisory affiliates are subject to a disqualification as described in Rule 262 of SEC Regulation A;                                                                                                                                    
  2. The private fund adviser files with the Administrator each report and amendment thereto that an exempt reporting adviser is required to file with the Securities and Exchange Commission pursuant to SEC Rule 204-4;                                                                                                                                                                          
  3. A private fund adviser who advises at least one (3)(c)(1) fund that is not a venture capital fund shall, in addition to satisfying each of the conditions specified in (1) and (2) above, comply with the following requirements:                                                                                                                                                             
    • The private fund adviser shall advise only those 3(c)(1) funds (other than venture capital funds) whose outstanding securities (other than short-term paper) are beneficially owned entirely by persons who, after deducting the value of the primary residence from the person’s net worth, would each meet the definition of an accredited investor in SEC Rule 501(a) at the time the securities are purchased from the issuer;                                                                                                                                                          
    • At the time of purchase, the private fund adviser shall disclose the following in writing to each beneficial owner of a 3(c)(1) fund that is not a venture capital fund:                                                                                  
      1. all services, if any, to be provided to individual beneficial owners;                                                    
      2. all duties, if any, the investment adviser owes to the beneficial owners; and
      3. any other material information affecting the rights or responsibilities of the beneficial owners.                
  4. The private fund adviser shall obtain on an annual basis, audited financial statements of each 3(c)(1) fund that is not a venture capital fund, and shall deliver a copy of such audited financial statements to each beneficial owner of the fund.

Wisconsin has adopted the grandfather provision which allows an investment adviser to a 3(c)(1) fund only (other than a venture capital fund) that has one or more beneficial owners who are not accredited investors as described in subparagraph (3)(a) above to be eligible to use the exemption if the following conditions are satisfied:

  1. the subject fund existed prior to the February 17, 2012 date of the Order;
  2. as of the February 17, 2012 date of the Order, the fund ceased to accept beneficial owners who are not accredited investors, as described in subparagraph (7)(a) of the Order;
  3. the investment adviser discloses in writing the information described in paragraph (7)(b)of the Order to all beneficial owners of the fund; and
  4. as of the February 17, 2012 date of the Order, the investment adviser delivers audited financial statements as required by paragraph (7)(c) of the Order.

Advisers to private funds under this Order will be treated in the same manner as SEC Exempt Reporting Advisers in that such advisers must make the same report filings with the division as are required by the SEC. This modified Form ADV filing is accomplished by filing via the Investment Adviser Registration Depository (IARD). The initial filing of the report must be made upon initial filing with the SEC. All amendments to the report filed with the SEC must also be filed with the division via IARD.

There are no Wisconsin fees associated with filing these reports.

Private fund advisers who are registered with the SEC will not be eligible for this exemption and must comply with the state notice filing requirements applicable to federal covered investment advisers.

Advisers to private funds that are NOT eligible for the exemption and have assets under management of less than $100 million of assets under management must register as investment advisers with the division and their individuals meeting the definition of investment adviser representative must also register.

Advisers to private funds that are NOT eligible for the exemption and have assets under management between $100 million and $150 million are not required to register with the division but if they are considered Exempt Reporting Advisers with the SEC, they must file their reports with the division in conjunction with their SEC filings.

Investment Adviser Repres​entatives

An individual is exempt from the investment adviser representative registration requirements of Wis. Stat. s. 551.404,​ if he or she is employed by or associated with a private fund adviser or an exempt reporting adviser that is exempt from registration in this state and does not otherwise act as an investment adviser representative.

For questions, please feel free to contact the division at (608) 266-2139.

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Phone: (608) 266-2139