The Investment Advisers Act of 1940 is the U.S. federal statute governing investment advisers — entities that provide advice about securities for compensation — establishing registration, reporting, and conduct standards.

How it works

Fund managers advising private funds generally must register as investment advisers with the SEC or state securities regulators unless an exemption applies. Venture capital fund advisers historically used exemptions but many now register under the Dodd-Frank reforms and SEC rules defining “venture capital fund” eligibility. Registered advisers file Form ADV disclosing business structure, fees, conflicts, and disciplinary history. The Act imposes fiduciary duties to clients — typically the fund, with duties flowing to LP interests through fund documents. Rules cover advertising, custody, pay-to-play, and recordkeeping. State advisers manage smaller AUM thresholds. Non-U.S. managers marketing to U.S. LPs navigate parallel registration and exemption frameworks. Compliance programs are operational overhead for emerging managers.

Why it matters

• GPs: Registration status and exemption reliance must match fund strategy. Misclassification triggers SEC scrutiny and LP concerns.
• LPs: Review Form ADV during due diligence. Regulatory history and disclosure quality signal operational maturity.

Common mistake

Assuming all VC managers are unregulated. Many are registered advisers with ongoing compliance obligations despite managing private funds.

Related ideas

Form ADV, SEC registration, venture capital fund definition, and Investment Company Act are distinct but related regulatory frameworks for fund managers.