Securities Advisory Releases

Advisory Release AR-12-04:

Commissioner of Securities Issues No-Action Determination Contemplating Recent Rulemaking Concerning Missouri Private Fund Advisers

The Commissioner of Securities for the State of Missouri (the “Commissioner”) is issuing this advisory release to alert Missouri’s investment advisers of a recent no-action determination regarding advisers to private funds. The subject no-action letter is similar to relief provided in a July 20, 2011, no-action letter, and also contemplates a rulemaking filed by the Commissioner on April 26, 2012, concerning private funding advisers.

The Securities and Exchange Commission (“SEC”) on June 22, 2011, adopted rules requiring some advisers to private funds to register with the SEC, and eliminated the exemption from registration for private fund advisers previously found at section 203(b)(3) of the Investment Advisers Act of 1940. The elimination of section 203(b)(3) not only impacted federal securities laws, but Missouri securities laws as well.

MO 15 CSR 30-51.180(6) (the “Missouri Private Fund Adviser Exemption”), exempts from registration advisers to certain private funds that are also exempt from federal registration under section 203(b)(3). However, because section 203(b)(3) is no longer effective, the Missouri Private Fund Adviser Exemption is no longer relevant. As a result, investment advisers previously relying on that exemption from state registration may be required to either register or find another exemption to operate under.

Those changes prompted a request for, and the Commissioner’s grant of, no-action relief for EdgeHill Capital Partners, LLC (“EdgeHill”), a Missouri investment adviser relying upon the Missouri Private Fund Adviser Exemption. The Commissioner stated that no enforcement action will be taken against EdgeHill for transacting business as an unregistered investment adviser prior to the sooner of June 28, 2012, or the promulgation of a state regulation similar to the Private Fund Advisers Exemption, if EdgeHill continued its advisory business consistent with the representations made in its request (http://www.sos.mo.gov/securities/advisory.asp?nID=AR-11-04).

More recently, the Commissioner proposed an amendment to the Missouri Private Fund Adviser Exemption to reflect the SEC’s changes, and exempt from registration certain advisers to private funds. That proposed amendment to the Missouri Private Fund Adviser Exemption was submitted by the Commissioner for the rule-making process on April 26, 2012.

Just prior to the Commissioner’s submission of the proposed amendment to the Missouri Private Fund Advisers Exemption, a group of related Missouri investment advisers, including RiverVest Venture Management, LLC (that group hereinafter collectively referred to as the “RiverVest Entities”), submitted to the Commissioner a request for a no-action determination. According to that request, each of the RiverVest Entities either: (1) formerly qualified for the Missouri Private Fund Adviser Exemption; (2) was previously granted no-action relief related to registration as an investment adviser; or (3) is currently exempt from registration as an investment adviser under section 203(l) of the Investment Advisers Act of 1940. For that reason, the RiverVest Entities requested that the Commissioner not take enforcement action against the RiverVest Entities, or their employees, if they continued their current business arrangements and practices in Missouri without registering as an investment adviser.

The Commissioner responded to the RiverVest Entities’ request on May 16, 2012, by issuing a no-action determination in accordance with section 409.6-605(d), RSMo. (Cum. Supp. 2011). The no-action determination provides that the Commissioner will take no action against the RiverVest Entities, or their employees, if they continue their business arrangements and practices consistent with the representations made in their request, prior to the sooner of May 16, 2013, or the final promulgation of the amendment to the Missouri Private Fund Adviser Exemption proposed by the Commissioner on April 26, 2012, or a rule substantially similar to it.

If you have any questions, please contact the Securities Division at (573) 751-4136, or for more information on the impact of Dodd-Frank on securities regulation in Missouri, visit: http://www.sos.mo.gov/securities/iaswitch/

May 17, 2012