https://www.youtube.com/watch?v=-IkrdG8vgdg&t=16s
The bitcoin lawyer Adam Tracy explains SEC investment advisor registration for cryptocurrency hedge fund managers
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A former competitive rugby player, serial entrepreneur and, trader attorney, Adam S. Tracy offers over 17 years of progressive legal and compliance experience in the areas of corporate, commodities, cryptocurrency, litigation, payments and securities law. Adam’s experience ranges from commodities trader for oil giant BP, initial public offerings, M&A, to initial coin offerings, having represented both startups to NASDAQ-listed entities. As an early Bitcoin adapter, Adam has promoted growth of cryptocurrency and offers a unique approach to representing crypto-clients. Based in Chicago, IL, Adam graduated from the University of Notre Dame with dual degrees in Finance and Computer Applications and would later obtain his J.D. and M.B.A. from DePaul University. Adam lives outside Chicago with his six animals, which is illegal where he lives.
Bitcoin website: http://www.bitcoin-lawyer.org
Primary website: http://www.tracyfirm.com
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Email me: at@tracyfirm.com
TRANSCRIPTION:
A popular topic (especially with my hedge fund clients) is do I need to register as an investment adviser? And there’s two parallel: one being registration with the SEC, and one being registration with the individual state. So let’s just focus on on the SEC. Generally speaking, an investment advisor is somebody who engages in the practice for a fee of advising as to the value of security. So when you’re talking about a hedge fund manager, generally speaking, you fall into that category or that definition — the keyword, the operative word being securities. But I’ll get right back to that. So there’s three general parameters that would require registration with the SEC as an investment adviser. 1) One is regulatory assets under management in excess of a 150 million — that’s an absolute requirement. 2) Two is regulatory assets under management of a 100 million and some of your clients (some, not all) are not hedge funds or private equity funds. 3) Three you have regulatory assets under management of 25 million or less some, of your clients are not hedge funds or private equity funds, and you live in a state where investment advisor registration is not required, or you live in a state where it’s required but not required by examination. So the only two states there are Wyoming and New York. So you’ve got these three subcategories, the fourth is whether you generally hold yourself out to be investment advisor which is sort a catch-all, but you have these three thresholds: 150, 100, 25 million. So for your startup funds generally speaking, you’re under 25 million. There’s no compulsory registration as an investment advisor, and you don’t have to do it, depending on what state you’re doing it in you definitely don’t have to do it. When you get up to a hundred million and you have non-hedge fund or private equity clients, then it becomes required. So generally speaking in that range up to one hundred million you’re pretty much safe. Now in the crypto space it’s odd because when you want to talk about, you know, what the definition by the SEC’s own accord what definition of investment advisor, it’s someone who opines or advises as to the value of securities. Right? And so the question becomes well, if I’m advising as to the value of Bitcoin am I acting as an investment adviser? Well, answer would technically no because Bitcoin is deemed be commodity, and would trigger a whole slew of laws under the Commodities Act and the NFA Regulation, but it wouldn’t trigger any Investment Advisor Act. And so then the question becomes too what if I’m advising as to etherium? What if I’m advising as to Ripple? What if I’m advising as to Neo or any of these esoteric sort of currency type cryptocurrencies, which really been haven’t classified. So, you know, depending on the composition of the fund that you have, the question becomes whether you’re acting as an investment adviser to begin with and whether registration is even really question because the products you’re dealing with aren’t securities, right? And so that’s where this sort of gray area lies. But, you know, the bright line black line sort of rules would be the threshold of 25 million, 100 million, 150 million as it relates to regulated assets under management, so assets not including debt or contingent liabilities at offset that. So, hit me up if you have questions about investment advisor registration or fund formation. at@tracyfirm.com. TracyFirm.com. I’m Adam Tracey. I’ll talk to you soon.
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