California Drops HF Registration Proposal

The California Department of Corporations has withdrawn a proposed amendment to its rules that would have required many hedge fund advisers doing business in the state of California to register with that department.

The proposal, issued in October 2007, came in the form of a change in the state's private adviser exemption, Rule 260.204.9. With the withdrawal of the proposal, that rule stands as is.

This rule exempts from registration any person who does not hold himself out to the public as an investment adviser; has fewer than 15 clients; and either has assets under management of $25 million or more, or provides investment advice only to venture capital companies.

The proposed amendment would have removed the references to the number of clients or to the amount of assets under management, so that the exemption would have remained in place only for investment advisers that limited themselves to providing advice to venture capital clients and entities. All other advisers would have had to choose between registration with the Securities and Exchange Commission or registration within California.

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