Hedge funds with regulatory assets under management in excess of $100 million are required to register with the U.S. Securities and Exchange Commission (SEC). Advisors who have regulatory capital under management between $100 million and $150 million and qualify for the private fund advisor exemption do not have to register with the SEC.

Hedge Fund Regulation

After 2011, the Dodd-Frank Act raised the lower limit for hedge funds advisors to register with the SEC to $100 million and also defined a new category of advisors, called mid-sized advisors, who have regulatory assets under management between $25 million and $100 million. An advisor of a mid-sized hedge fund does not have to register with the SEC if he is registered with the state where his principal office is located. However, an advisor of a mid-sized hedge fund is required to register with the SEC if his home state has inadequate regulation and he does not have the private fund advisor exemption. 

Private Fund Advisor Exemption

A hedge fund advisor may avoid registration with the SEC if he qualifies for the private fund advisor exemption under the Dodd-Frank Act. This exemption is applicable to an advisor of a hedge fund who has principal offices located in the United States, has regulatory assets under management below $150 million, and only has private fund clients. If a hedge fund advisor has at least one non-private fund client, he is not eligible for the private fund advisor exemption. Also, all assets count towards the $150 million ceiling, including assets managed outside of the United States.

(For related reading, see "Evaluating Hedge Fund Performance.")

  1. Are there publicly traded hedge funds?

    See why a privately arranged hedge fund may decide to take its fund public, and how the investing public at large can gain ... Read Answer >>
Related Articles
  1. Financial Advisor

    Advisors Face More SEC Reporting Requirements

    The SEC has mandated that investment advisors provide more disclosure on separately managed accounts and performance numbers used in advertising.
  2. Managing Wealth

    Is the Hedge Fund Over?

    After decades at the top of the investment food chain, hedge funds may be in decline.
  3. Investing

    Hedge Funds: Higher Returns Or Just High Fees?

    Discover the advantages and pitfalls of hedge funds and the questions to ask when choosing one.
  4. Investing

    Why Hedge Funds Do Not Belong in Your Portfolio

    Considering hedge funds as part of your investment strategy? Make sure you understand all the risks and fees involved.
  5. Managing Wealth

    HF Performance Report: Did Hedge Funds Earn Their Fee in 2015?

    Find out whether hedge funds, which have come under tremendous pressure to improve their performance, managed to earn their fee in 2015.
  6. Investing

    Activist Hedge Funds: Follow the Trail to Profit

    Learn to profit by following the lead of hedge funds.
  7. Investing

    Hedge Funds Tutorial

    Hedge funds can be an integral part of a well-diversified portfolio - if you know how to choose them.
  8. Financial Advisor

    Ethical Standards You Should Expect From Financial Advisors

    Professional ethics in the financial services profession can be confusing. Here are some ways to ensure you are getting the best out of your advisor.
  9. Tech

    SEC Targets Cryptocurrency Hedge Funds In Probe

    For the first time, hedge funds have been drawn into SEC examinations regarding cryptocurrencies.
  1. Federal Covered Advisor

    A federal covered advisor is a U.S.-based investment advisor ...
  2. Advisor

    An advisor is any person or company involved in advising or investing ...
  3. Hedge Fund Manager

    A hedge fund manager is an individual who oversees and makes ...
  4. Natural Hedge

    A natural hedge is the reduction in risk that can arise from ...
  5. Hedge Accounting

    Hedge accounting is a method of accounting where entries for ...
  6. Personal Financial Advisor

    A personal financial advisor is a professional who help individuals ...
Trading Center