7. What are requirements for an Investment Advisor?

An Investment Advisor is a Fund’s (or Syndicate’s) service provider whose role is to provide investment recommendations or conduct securities analysis on a commercial basis.

In the USA, the general rule is that Investment Advisors should be registered. However, there is an exception for Investment Advisors of Venture Capital Funds and Private Funds.

Investment Advisors of these funds may apply for the status of Exempted Reporting Advisor. This status relieves Investment Advisors from registration but obliges them to submit certain reports.

For a Fund (or a Syndicate) to be qualified as a Private Fund or a Venture Capital Fund, it should not propose to make a public offering of its securities and either have less than 100 investors or be limited to solely qualified investors.

Furthermore, there are specific requirements for a fund to be considered as a Venture Capital Fund. The USA legislation has a complete list of such requirements. It includes the following: a fund should show the investors that it pursues venture capital strategy; a fund should hold less than 20% of its capital in not qualifying investments; a fund should not incur leverage in excess of 15% of its capital and other.

Concerning Private Funds, the exception only takes place when a particular Investment Advisor advises solely Private Funds and has in total less than $150 mln. under management in the USA.

Therefore, depending on Fund’s (or Syndicate’s) structure and investment policy, Investment Advisors of both may claim the status of Exempted Reporting Advisor, and, consequently, there will be no need for them to be registered.