The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that advisers to venture capital funds and/or to small private fund (less than $150 million assets under management) report certain items to the SEC. Dynamic Securities Analytics, Inc. analyzed the disciplinary disclosure items reported by Exempt Reporting Advisers (“ERA”).
- 3% of ERAs report regulatory, criminal or civil disciplinary issues
- 10 firms reported felony convictions or guilty pleas
- SEC or CFTC entered orders against 26 ERAs or advisory affiliates
- Small private funds were much more likely to report a disciplinary action than venture funds
The table below provides a selection of disciplinary disclosure items and the count of ERAs that reported the disclosure type for either the firm or an advisory affiliate.
- 39% ERAs are based overseas. Foreign-based ERAs report disciplinary disclosure items at a slightly higher rate than US-based firms.
- The exemption on which the firm relied to qualify as an ERA was very enlightening. 91% of firms reporting disciplinary disclosures relied on the small private fund exemption.