Sponsors who invest through SPVs sometimes assume adviser regulation is for people who manage other people's portfolios, not for someone who finds a deal and invites investors in. It isn't that simple. Under Section 202(a)(11) of the Investment Advisers Act, an investment adviser includes anyone who, for compensation, is in the business of advising others about the value of securities or the advisability of investing in them. Interests in operating companies, such as preferred stock, common stock, SAFEs, and convertible notes, are securities. The SPVs are the clients, and carry or a management fee is the compensation. So whoever picks the deals and advises the SPVs is, in most cases, an investment adviser.

An adviser must register with the SEC or with a state unless an exemption applies. For SPV sponsors, two federal exemptions do most of the work: the venture capital fund adviser exemption and the private fund adviser exemption. Both lead to the same status, exempt reporting adviser. The difference is what the adviser can invest in and how large it can grow.

The Venture Capital Fund Adviser Exemption

Section 203(l) exempts an adviser that advises solely one or more venture capital funds. There is no limit on assets under management. The catch is the definition. Under Rule 203(l)-1, each fund the adviser advises must:

  • represent to investors and potential investors that it pursues a venture capital strategy;
  • immediately after acquiring any asset, hold no more than 20 percent of its aggregate capital contributions and uncalled committed capital in assets other than qualifying investments and short-term holdings;
  • not borrow or guarantee obligations beyond 15 percent of that capital, and only for non-renewable terms of no more than 120 calendar days, with an exception for certain guarantees of portfolio company obligations;
  • not offer investors redemption rights except in extraordinary circumstances; and
  • not be a registered investment company or a business development company.

Qualifying investments are generally equity securities acquired directly from a qualifying portfolio company, which is a company that is not public or foreign-traded at the time of investment and is not itself a fund. An SPV that buys preferred stock in a startup's financing round fits well. An SPV that buys shares from existing holders in a secondary sale, lends to a company, or invests in another fund does not hold qualifying investments, and a single-asset SPV doing any of those can't fit within the 20 percent basket. One non-qualifying SPV can take the adviser out of the exemption, because the adviser must advise solely venture capital funds.

The Private Fund Adviser Exemption

Section 203(m) and Rule 203(m)-1 exempt an adviser with its principal office and place of business in the United States that acts solely as an adviser to qualifying private funds and manages private fund assets of less than $150 million. There is no limit on strategy. Secondaries, credit, and funds of funds all work, as long as the clients are private funds. An SPV relying on Section 3(c)(1) or 3(c)(7) is a private fund. The Investment Company Act side is covered in Investment Company Act Limits for SPVs.

Assets are measured as regulatory assets under management, calculated annually. Advisers based outside the United States have a separate version of the test: no U.S. person clients other than qualifying private funds, and less than $150 million in private fund assets managed from a place of business in the United States.

When an adviser reports $150 million or more in private fund assets in its annual update, it must register unless another exemption applies. If it has complied with its exempt reporting adviser filings, the Form ADV instructions give it up to 90 days after that annual update to apply for SEC registration, during which it may continue advising its private funds. A House-passed bill would raise the $150 million figure, but as of this writing it has not become law.

Which One Fits

A sponsor whose SPVs will only make primary equity investments in private companies, and expects to stay with that strategy, can rely on the venture capital exemption and never worry about an asset threshold. A sponsor whose deals may include secondaries, debt, or anything outside venture is usually better served by the private fund adviser exemption, as long as it stays below $150 million. Neither exemption allows a client that is not a fund, such as a separately managed account for a single investor. Accepting one generally means registering.

What Exempt Reporting Adviser Status Requires

Exempt reporting advisers are exempt from registration, not from the Advisers Act. The requirements are lighter but real:

  • Form ADV. An exempt reporting adviser files a short version of Form ADV Part 1A (Items 1, 2, 3, 6, 7, 10, and 11 and the related schedules) through the IARD system. The first filing is due within 60 days of relying on the exemption, and the adviser pays a filing fee.
  • Updates. An annual updating amendment is due within 90 days after fiscal year end. Some changes, including to Items 1, 3, and 11, require a prompt amendment.
  • Antifraud. Section 206 applies in full, and Rule 206(4)-8 prohibits misleading statements to investors and prospective investors in a pooled investment vehicle.
  • Examination. The SEC can examine exempt reporting advisers.

The FinCEN rule that would require AML programs for exempt reporting advisers has been postponed to January 1, 2028. The Exempt Reporting Adviser: What ERAs Can and Cannot Do goes through which registered-adviser rules don't apply and why a basic compliance framework is still worth having.

State Rules Depend on the Principal Office

Exempt reporting adviser status is federal. The state where the adviser has its principal office, and in some cases other states where it does business, may require registration, impose its own exemption conditions, or require the exempt reporting adviser report to be filed with the state as well. Individuals who give advice for the adviser may also be subject to state rules. The answer differs from state to state, so it should be checked before the first SPV closes, especially if principals are in more than one state or outside the United States.

Which Entity Files

The filing entity is usually the management company, which is the entity that advises the SPVs under a management agreement. If the sponsor starts with a single manager entity, that entity files. GP Entity and Management Company: Do You Need Both on Day One? covers that choice. A sponsor that plans to raise a blind-pool fund later should check whether the chosen exemption still fits once the fund is added. A fund that pushes private fund assets past $150 million, or a non-venture strategy under the venture exemption, changes the answer. See Deal-by-Deal SPVs Before a Blind-Pool Fund.

If you're setting up an SPV platform and want to confirm which adviser exemption fits your deals, we're glad to talk it through. More on how we work with sponsors is on our fund formation page.