Changes in Fund Manager Registration Requirements Under the Dodd-Frank Act August 24, 2010Lance Friedler – Sadis & Goldberg LLP Ron S. Geffner – Sadis & Goldberg LLP John Schrier - Caceis

2 Impact of Independent Administration

Record Retention Requirements >Record Retention Policies Intersect a Number of Aspects of Manager Processes Disclosure of CACEIS as external holder of documents  Note that CACEIS is moving to electronic document collection alone, so consideration needs to be given to collection of “wet” copies of subscription documents.  CACEIS available to provide due diligence information regarding document retention policies.  DRP information also available. Managers will need their own program for document control, retention and storage  Two years on premises.  Five year retention – starting with “last date of relevance.”  “Flex” cabinets. 3

Interim Changes in the Subscription Process >Due Diligence on Outside Service Providers CACEIS can provide upon request, information for due diligence files. Similar information is needed from other service providers. Privacy Policies available upon request.  Fund managers must comply with Regulation S-P, too. >Impact on Fund Accounting – Pricing CACEIS “calculates” net asset values – but does not establish them. Valuation processes applicable to registered advisers require additional documentation, periodic testing (including forensic testing) and annual review. Testing should cover administrator-prime broker-internal trade reconciliation process. >Update PPMs to Reflect Registered Status Great opportunity for a more general update of disclosure documents. 4

Dodd-Frank Wall Street Reform and Consumer Protection Act  On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Financial Bill") into law.  Numerous aspects of the Financial Bill impact private fund managers.

Investment Adviser Registration  Under the Financial Bill, the Advisers Act will also be amended to require many investment advisers that are currently exempt from registration with the SEC to register.  Generally, the Financial Bill requires all investment advisers to hedge funds and/or private equity funds that manage $150 million or more in assets to register with the SEC.  The new rules under the Advisers Act will become effective on July 21, 2011.

Investment Adviser Registration (cont.)  The "private adviser" exemption which many hedge fund and private equity fund managers relied upon in the past is being eliminated. The "private adviser" exemption enabled an investment adviser to avoid SEC registration if it:  (i) did not act as an investment adviser to a registered investment company or business development company;  (ii) had fewer than 15 clients (counting each fund as 1 client); and  (iii) did not hold itself out to the public as an investment adviser.

Investment Adviser Registration (cont.)  Investment Advisers with $ million AUM. Investment advisers to private funds with $25 million to $100 million in assets under management (“AUM”) will be prohibited from registering with the SEC if the investment adviser is required to register with a State and would be subject to examination by virtue of such State registration, although such investment advisers may register with the SEC if they would otherwise be required to register with 15 or more states. For example, Connecticut and California both currently require investment advisers to hedge funds and/or private equity funds to register as an investment adviser to the extent such investment adviser does not qualify for SEC registration.  Definition of AUM. An investment adviser domiciled in the U.S. must include all U.S. and non-U.S. accounts it manages or advises towards the AUM calculation.

Investment Adviser Registration (cont.)  Advisers with $ million AUM. An investment adviser with AUM of $100 million or more is presumptively required to register as an investment adviser with the SEC. The SEC is required to provide an exemption from registration under the Advisers Act for an investment adviser that acts solely as an investment adviser to private funds (such as hedge funds and private equity funds) with AUM in the U.S. of less than $150 million. Investment advisers managing between $100 and $150 million AUM that do not satisfy this exemption (for example, investment advisers that manage separate accounts in addition to private funds) must register with the SEC. Investment advisers exempted under this provision will be subject to recordkeeping and reporting requirements that the SEC determines necessary and appropriate, and, in prescribing regulations to carry out the requirements of this provision, the SEC is required to provide for registration and examination procedures that take into account the level of systemic risk posed by such funds.

Investment Adviser Registration (cont.)  Investment Advisers with $150+ million AUM. Investment advisers with AUM in the U.S. of $150 million or more will be required to register with the SEC, unless they are exempt pursuant to one of the other exemptions contained in the Advisers Act.  Private Equity Funds. The Financial Bill does not provide an exemption from SEC registration for investment advisers to private equity funds.  Venture Capital Funds. Investment advisers that manage only venture capital funds are exempt from SEC registration. They are, however, required to maintain records and provide reports to the SEC, the content of which is to be determined by the SEC. The SEC is required to determine the definition of “venture capital fund” within one year of the enactment of the Financial Bill. An investment adviser that manages venture funds along with other funds or accounts will be required to register as an investment adviser if another exemption is not applicable to the investment adviser.

Investment Adviser Registration (cont.)  Family Offices. The Financial Bill not only exempts “family offices” from registration, but it also excludes them entirely from the definition of “investment adviser” under the Advisers Act. The term “family office” will be defined by SEC rulemaking consistent with previous exemptions recognizing the variety of arrangements used by family offices.

Investment Adviser Registration (cont.)  Non-U.S. Investment Advisers. Many investment advisers based outside the United States will be required to register with the SEC. A new “foreign private adviser exemption” will apply only where the investment adviser:  (i) has no place of business in the U.S.;  (ii) has fewer than 15 U.S. clients and investors in private funds (e.g., U.S. tax exempt investors in a non-U.S. private fund);  (iii) has less than $25 million AUM (or such higher amount determined by the SEC) attributable to U.S. clients and investors in private funds; and  (iv) does not: (1) hold itself out generally to the U.S. public as an investment adviser; or (2) act as an investment adviser to a registered investment company or business development company. If an investment adviser fails to meet any one of the criteria, it will be required to register as an investment adviser if another exemption is not applicable to the investment adviser. The Financial Bill does not specifically provide for the “registration lite” regime that currently applies to many non-U.S. investment advisers.

Investment Adviser Registration (cont.)  CFTC Registered Investment Advisers. An investment adviser registered as Commodity Trading Adviser with the Commodities Futures Trading Commission will be exempt from SEC registration unless its business becomes predominantly securities-related. This continues the manner in which dual registration was dealt with before.

Interim Changes in the Subscription Process >CACEIS LEGAL CONTACT POINT: > John V. Schrier Corporate Counsel, Fund Structuring CACEIS (USA) Inc. 295 Madison Avenue, 5th Floor New York, NY Direct Tel Main Tel Fax

Sadis & Goldberg LLP Contacts  Ron S. Geffner Partner and Head of Financial Services Sadis & Goldberg LLP 551 Fifth Avenue, 21 st Floor New York, NY Direct Tel  Lance Friedler Partner, Financial Services Sadis & Goldberg LLP 551 Fifth Avenue, 21 st Floor New York, NY Direct Tel