Donohue Says that BD Registration is Required for Private Fund Intermediaries
In a recent speech, Andrew Donohue, Director of the SEC’s Division of Investment Management, warned intermediaries that distribute private funds against inappropriately relying on exemptions from broker-dealer registration. He explained that the receipt of compensation in connection with the sale of securities (such as interests in a private fund) requires registration as, or association with, a registered broker-dealer. He noted the importance of BD registration in the private fund market including suitability and sales practice regulation.
OUR TAKE: Whether or not Congress requires private fund advisers to register, Mr. Donohue’s statements suggest to us that the SEC will pursue tougher examination and enforcement of distribution activities.