Cobre Total en el Proceso de Trefilado.

Under rule 203(m)-1, all of the private fund assets of an adviser with a principal office and place of business in the United States are considered to be ―assets under management in the

approves its registration. These same limitations apply to non-U.S. advisers with respect to their clients that are United States persons.

379

ABA Letter; AIMA Letter; CompliGlobe Letter; Gunderson Dettmer Letter; Katten Foreign Advisers Letter; Sadis & Goldberg Implementing Release Letter; Seward Letter; Shearman Letter.

380

An adviser must file its annual Form ADV updating amendment within 90 days after the end of its fiscal year and, if the transition period is available, may apply for registration up to 90 days after filing the amendment. See also supra note 378.

381

Shearman Letter. 382

United States,‖ even if the adviser has offices outside of the United States.383

A non-U.S. adviser, however, need only count private fund assets it manages at a place of business in the United States toward the $150 million asset limit under the exemption.384

As discussed in the Proposing Release, the rule deems all of the assets managed by an adviser to be managed ―in the United States‖ if the adviser‘s ―principal office and place of business‖ is in the United States. This is the location where the adviser controls, or has ultimate responsibility for, the management of private fund assets, and therefore is the place where all the adviser‘s assets are managed, although day-to-day management of certain assets may also take place at another location.385 For most advisers, this approach will avoid difficult attribution determinations that would be required if assets are managed by teams located in multiple

jurisdictions, or if portfolio managers located in one jurisdiction rely heavily on research or other advisory services performed by employees located in another jurisdiction.

Most commenters who addressed the issue supported our proposal to treat ―assets under management in the United States‖ for non-U.S. advisers as those assets managed at a U.S. place

383

Rule 203(m)-1(a). The rule defines the ―United States‖ to have the same meaning as in rule 902(l) of Regulation S under the Securities Act, which is ―the United States of America, its territories and possessions, any State of the United States, and the District of Columbia.‖ Rule 203(m)-1(d)(7); 17 CFR 230.902(l).

384

Rule 203(m)-1(b). Any assets managed at a U.S. place of business for clients other than private funds would make the exemption unavailable. See also supra note 378. We revised this provision to refer to assets managed ―at‖ a place of business in the United States, rather than ―from‖ a place of business in the United States as proposed. The revised language is intended to reflect more clearly the rule‘s territorial focus on the location at which the asset management takes place.

385

This approach is similar to the way we have identified the location of the adviser for regulatory purposes under our current rules, which define an adviser‘s principal office and place of business as the location where it ―directs, controls and coordinates‖ its advisory activities, regardless of the location where some of the advisory activities might occur. See rule 203A-3(c); rule 222-1.

of business.386 One commenter did, however, urge us to presume that a non-U.S. adviser‘s assets are managed from its principal office and place of business to avoid the inherent difficulties in determining the location from which any particular assets of a private fund are managed if an adviser operates in multiple jurisdictions.387 As we stated in the Proposing Release, this

commenter‘s approach ignores situations in which day-to-day management of some assets of the private fund does in fact take place ―in the United States.‖388 It also would permit an adviser engaging in substantial advisory activities in the United States to escape our regulatory oversight merely because the adviser‘s principal office and place of business is outside of the United States. This consequence is at odds not only with section 203(m), but also with the foreign private adviser exemption discussed below in which Congress specifically set forth

circumstances under which a non-U.S. adviser may be exempt provided it does not have any place of business in the United States, among other conditions.389

In addition, some commenters supported an alternative approach under which we would interpret ―assets under management in the United States‖ by reference to the source of the assets (i.e., U.S. private fund investors).390 One of the commenters argued that our interpretation would

386

ABA Letter; Comment Letter of Association Française de la Gestion financière (Jan. 24, 2011) (―AFG Letter‖) (sought clarification that assets managed from non-U.S. offices are exempted); AIMA Letter; Comment Letter of Avoca Capital Holdings (Dec. 21, 2010) (―Avoca Letter‖); Debevoise Letter; Dechert Foreign Adviser Letter; EFAMA Letter; Gunderson Dettmer Letter; Katten Foreign Advisers Letter; MAp Airports Letter; Merkl Letter; Comment Letter of Non-U.S. Adviser (Jan. 24, 2011) (―Non-U.S. Adviser Letter‖). Cf. Sen. Levin Letter (advisers managing assets in the United States of funds incorporated outside of the United States ―are exactly the type of investment advisers to which the Dodd-Frank Act‘s registration requirements are intended to apply‖).

387

Katten Foreign Advisers Letter. 388

See Proposing Release, supra note 26, at nn.204-205 and accompanying text. 389

See infra Section II.C.

390 _{Comment Letter of Portfolio Manager (Jan. 24, 2011) (―Portfolio Manager Letter‖); Merkl Letter} (suggested that it ―may be useful‖ to look both to assets managed from a U.S. place of business

disadvantage U.S.-based advisers by permitting non-U.S. advisers to accept substantial amounts of money from U.S. investors without having to comply with certain U.S. regulatory

requirements, and cause U.S. advisers to move offshore or close U.S. offices to avoid regulation.391

As we explained in the Proposing Release, we believe that our interpretation recognizes that non-U.S. activities of non-U.S. advisers are less likely to implicate U.S. regulatory interests and is in keeping with general principles of international comity.392 The rule also is designed to encourage the participation of non-U.S. advisers in the U.S. market by applying the U.S.

securities laws in a manner that does not impose U.S. regulatory and operational requirements on a non-U.S. adviser‘s non-U.S. advisory business.393 Non-U.S. advisers relying on rule 203(m)-1 will remain subject to the Advisers Act‘s antifraud provisions and will become subject to the requirements applicable to exempt reporting advisers.

One commenter proposed an additional interpretation under which we would determine the ―assets under management in the United States‖ for U.S. advisers only by reference to the

and assets contributed by U.S. private fund investors to address both investor protection and systemic risk concerns).

391

Portfolio Manager Letter. See also Comment Letter of Tuttle (Nov. 30, 2010) (submitted in connection with the Implementing Adopting Release, avail. at http://www.sec.gov/comments/s7- 35-10/s73510.shtml) (―Tuttle Implementing Release Letter‖) (argued that businesses may move offshore if they become too highly regulated in the United States).

392

See Proposing Release, supra note 26, at n.207 (identifying Regulation S and Exchange Act rule 15a-6 as examples of Commission rules that adopt a territorial approach).

393

See generally Division of Investment Management, SEC, Protecting Investors: A Half Century of Investment Company Regulation, May 1992 (―1992 Staff Report‖), at 223-227 (recognizing that non-U.S. advisers that registered with the Commission were arguably subject to all of the substantive provisions of the Advisers Act with respect to their U.S. and non-U.S. clients, which could result in inconsistent regulatory requirements or practices imposed by the regulations of their local jurisdiction and the U.S. securities laws; in response, advisers could form separate and independent subsidiaries but this could result in U.S. clients having access to a limited number of advisory personnel and reduced access by the U.S. subsidiary to information or research by non- U.S. affiliates).

amount of assets invested, or ―in play,‖ in the United States.394

We decline to adopt this approach because it would be difficult for advisers to ascertain and monitor which assets are invested in the United States, and this approach thus could be confusing and difficult to apply on a consistent basis. For example, an adviser might invest in the American Depositary Receipts of a company incorporated in Bermuda that: (i) engages in mining operations in Canada, the principal trading market for its common stock; and (ii) derives the majority of its revenues from exports to the United States. It is not clear whether these investments should be considered ―in play‖ in the United States.

Another commenter urged us to exclude assets managed by a U.S. adviser at its non-U.S. offices.395 This, the commenter argued, would allow more U.S. advisers to rely on the

exemption and allow us to focus our resources on larger advisers more likely to pose systemic risk. But the management of assets at these non-U.S. offices could have investor protection implications in the United States, such as by creating conflicts of interest for an adviser between assets managed abroad and those managed in the United States.

In addition, we sought comment as to whether, under the approach we are adopting today, some or most U.S. advisers with non-U.S. branch offices would re-organize those offices as subsidiaries in order to avoid attributing assets managed to the non-U.S. office.396 No

commenter suggested this would occur. We continue to believe that rule 203(m)-1 will have only a limited effect on multi-national advisory firms, which for tax or business reasons keep their non-U.S. advisory activities organizationally separate from their U.S. advisory activities.

394 _{Comment Letter of Richard Dougherty (Dec. 14, 2010) (―Dougherty Letter‖).} 395

Comment Letter of T.A. McKay & Co., Inc. (Nov. 23, 2010). 396

For these reasons, and our substantial interest in regulating all of the activities of U.S. advisers, we decline to revise rule 203(m)-1 as this commenter suggested.

Several commenters asked that we clarify whether certain U.S. activities or arrangements would result in an adviser having a ―place of business‖ in the United States.397

Commenters also sought guidance as to whether limited-purpose U.S. offices of non-U.S. advisers would be considered U.S. places of business (e.g., offices conducting research or due diligence).398

Under rule 203(m)-1, if a non-U.S. adviser relying on the exemption has a place of business in the United States, all of the clients whose assets the adviser manages at that place of business must be private funds and the assets managed at that place of business must have a total value of less than $150 million. Rule 203(m)-1 defines a ―place of business‖ by reference to rule 222-1(a) as any office where the adviser ―regularly provides advisory services, solicits, meets with, or otherwise communicates with clients,‖ and ―any other location that is held out to the general public as a location at which the investment adviser provides investment advisory services, solicits, meets with, or otherwise communicates with clients.‖

Whether a non-U.S. adviser has a place of business in the United States depends on the facts and circumstances, as discussed below in connection with the foreign private adviser exemption.399 For purposes of rule 203(m)-1, however, the analysis frequently will turn not on whether a non-U.S. adviser has a U.S. place of business, but on whether the adviser manages assets, or has ―assets under management,‖ at such a U.S. place of business. Under the Advisers Act, ―assets under management‖ are the securities portfolios for which an adviser provides

397

See, e.g., EFAMA Letter. 398

AIMA Letter; Dechert General Letter; EFAMA Letter. See also ABA Letter; Vedanta Letter. 399

―continuous and regular supervisory or management services.‖400

This is an inherently factual determination. We would not, however, view providing research or conducting due diligence to be ―continuous and regular supervisory or management services‖ at a U.S. place of business if a person outside of the United States makes independent investment decisions and implements those decisions.401