Do hedge fund managers need to be register if the LLC is located in Wyoming?
In the state of Wyoming you do not need to register as an investment advisor. If my hedge fund is registered as an LLC in the state of Wyoming but I live in a state that requires registration. Do I still need to register?
I found an article: thinkadvisorDOTCOM/2015/02/04/sec-busts-3-advisors-for-falsifying-state-registra
In the cases mentioned in the article all of the advisers had places of business outside of Wyoming. My fund is all electronic and has no place of business. The article also states:
"Firms based in Wyoming must register with the SEC because the state does not regulate investment advisors"
But the Advisers Act of 1940 Section 203A(a)(1)(A) forbids you to register with the SEC unless you have at least $25 million in assets.
The site is been a huge help with all of the research I have had to do for this project. Thank you so much for any help!
This is not legal advice: get legal advice.
First thing to do...get an attorney/law group for your fund. If you're taking in outside capital, you will need a set of docs. The attorney will also handle all of the registration issues for your state.
I'm not sure what you mean by "all electronic". You're going to have an address on your articles of registration/incorporation no matter what.
There are two companies formed in the process of setup. 1. Management Company: Set up as LLC, serves as GP of the Fund, makes investment decisions, gets paid management/incentive fees from the Fund, etc. Typically set up in the place you do business on a daily basis.
At the end of the day, you're going to need an attorney if you want to raise money. There's a lot more to it than what I threw out there.
Thank you for your response! I am familiar with the structure of a hedge fund. I will not be trading futures/commodities so I don't have to worry about the NFA or CFTC. My fund is a small 3 (c)(1) Reg D fund and my clients are friends of mine who would be classified as "qualified clients". I will have a PO box or virtual office in Wyoming. This is just a way for me to legally invest their money because of my past success. I am a college student and I can't afford an attorney at this point. I have been carefully studying offering docs and I am going to construct my own (I have heard countless times how ill-advised this is). I am not worried about my friends suing me. My concern is that the SEC will fine me as they did the people in the article I posted. I am looking to register with Wyoming because the Wyoming securities laws are more favorable than the state I am in. Thank you again for your response!
No worries, I went through the process a few years ago so feel free to bounce more questions my way. I set up the management company in a state with favorable securities laws and set up the fund in Delaware. I didn't have to register in my home state, but I did have to file exemptions with the SEC (Form D filed annually). There are also Blue Sky laws you have to pay attention to and fees you have to file yearly in the states your investors are located. These fees vary by state (some are annual, others are one-time, and some are a combination of the two). Each time you bring in a new investor you have to update your Blue Sky filing. There are also special circumstances for investors from certain states (NY and FL if I remember correctly). This is where you can get dinged, at least this is what I learned from my attorney. Good luck, man.
Investment advisers with principal place of business in Wyoming are required to register with the SEC. If you would be required to register with your state securities authority, but for being based in Wyoming, you are required to register with the SEC instead. The SEC AUM threshold is now $100 million, but it does not apply to Wyoming advisers.
Some investment advisers, such as the manager of an exempt fund, may not be required to register at all. If you are not required to register because you are not holding yourself out as an investment adviser, are not making a general solicitation of private securities, and you are not required to register as an ERA, then there's no need to falsify a place of business in Wyoming. You do not have to register no matter where you are based.
If, on the other hand, your activities would require you to register and you try to fake a principal place of business in Wyoming to get around that, expect to get in trouble for that.
Bottom line: you can't just set up a PO Box in Wyoming to avoid registering, if you need to register. But from what you describe above, you probably don't need to register at all as long as you adhere to the exemption requirements.
Talk to your legal counsel.
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