SEC Division of Investment Management staff letter: Willkie Farr & Gallagher

WILLKIE FARR & GALLAGHERuP
Branch Chief
Chief Counsel's Office
Division of Investment Management
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: Venture Capital Fund Advisers Exemption
Dear Ms. Harke:
BARRY P. BARBASH
We represent a wide variety of asset management firms, including a number of firms that structure their businesses and operations so as to rely on the Securities and Exchange Commission's so-called "Venture Capital Fund Advisers Exemption," which exempts those firms from registration as an investment adviser under the Investment Advisers Act of 1940 (the "Advisers Act"). We are writing to identify for the Commission's staff what we believe are unintended consequences arising out of the application of the literal language of the exemption to transactions that are, and long have been, commonplace within the venture capital industry. We submit that the application of that language could effectively preclude venture capital fund managers from causing their funds to engage in those transactions, which would be inconsistent with the Commission's intention, in adopting the exemption, of enabling a manager of funds to operate outside of the scope of the Advisers Act when those funds invest in a manner consistent "with what . . . Congress understood venture capital funds to be, as reflected in the legislative materials, including the testimony Congress received [in connection with the legislation that became the Dodd-Frank Wall Street Reform and Consumer Protection Act]." 1 See Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers With Less Than $150 Million in Assets Under Management, and Foreign Private Advisers, Advisers Act Release No. 3,222 (June 22, 2011), 76 Fed. Reg. 39,646, at 39,648 (July 6, 2011) ("Release 3,222"). NEW YORK WASHINGTON PARIS LONDON MILAN ROME FRANKFURT BRUSSELS in alliance with Dickson Minto W.S., London and Edinburgh