An Exempt Reporting Adviser (ERA) is an investment adviser exempt from registration with the Securities and Exchange Commission (SEC) but must still report certain information to the SEC and state securities regulators. This exemption is typically granted to advisers who manage private funds with assets under management below a certain threshold.
Which of the following best describes an Exempt Reporting Adviser (ERA)?
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Select an option above to see an explanation here.
A) An investment adviser registered with the SEC is a Federal Covered Adviser, not an ERA. B) An ERA is an investment adviser exempt from registration but must report certain information to the SEC and state securities regulators. C) A broker-dealer is a different type of financial firm, not an ERA. D) A private fund is an investment vehicle, not an investment adviser, and is not an ERA.
What form does an Exempt Reporting Adviser (ERA) use to report information to the SEC and state securities regulators?
A) broker-dealers use Form BD to register with the SEC and state securities regulators, not by ERAs. B) Form PF is used by certain investment advisers to report information about private funds they manage, but it is not the form used by ERAs. C) Form ADV is used by investment advisers to register with the SEC and state securities regulators and report certain information as an ERA. D) Form 13F is used by institutional investment managers to report their equity holdings, not by ERAs.
Which of the following types of investment advisers is most likely to qualify as an Exempt Reporting Adviser (ERA)?
A) An adviser managing a public mutual fund is subject to different regulatory requirements and is not likely to qualify as an ERA. B) An adviser managing a private fund with $50 million in assets under management is below the threshold for SEC registration and is most likely to qualify as an ERA. C) An adviser managing individual client accounts is subject to different regulatory requirements and is not likely to qualify as an ERA. D) An adviser managing a public ETF is subject to different regulatory requirements and is not likely to qualify as an ERA.
In 2011, the SEC adopted new rules under the Investment Advisers Act of 1940 that created the category of Exempt Reporting Advisers. These rules were designed to provide greater transparency and oversight of private fund advisers while reducing the regulatory burden on smaller advisers.
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Example Series 65 Example Practice Question
A small investment adviser manages a private fund with $100 million in assets under management. Because the fund's AUM is below the threshold for SEC registration, the adviser qualifies as an Exempt Reporting Adviser and must report certain information to the SEC and state securities regulators using Form ADV.
- Assets Under Management (AUM) threshold: An adviser may be exempt from registration if they manage less than a certain amount of assets. - Private Fund Adviser threshold: An adviser may be exempt from registration if they only advise private funds and have less than a certain amount of AUM. - Venture Capital Fund Adviser threshold: An adviser may be exempt from registration if they only advise venture capital funds.
- AUM threshold example: An adviser with less than $25 million in AUM may be exempt from SEC registration and only need to register with the state. - Private Fund Adviser threshold example: An adviser who only advises private funds and has less than $150 million in AUM may be exempt from registration. - Venture Capital Fund Adviser threshold example: An adviser who only advises venture capital funds, regardless of AUM, may be exempt from registration.