CALIFORNIA PROPOSES REGISTRATION OF INVESTMENT ADVISERS WITH PLACE OF BUSINESS IN CALIFORNIA

The California Department of Corporations has proposed an amendment to California Rule 260.204.9 (the "Rule") which would have the effect of requiring the registration with the state of investment advisers currently exempted from registration. The proposed amendment would require registration of investment advisers that are not registered with the SEC that also have a place of business in California.

Currently the Rule exempts investment advisers who have a place of business in the state who (i) have less than 15 "clients"; (ii) have more than $25 million in assets under management or who provide advice only to venture capital entities; (iii) who do not hold themselves out to the public as an investment adviser; and (iv) who are exempt from registration with the SEC by virtue of Section 203(b)(3) of the Investment Advisers Act of 1940. As amended, the Rule would require registration of all investment advisers except those who provide advice to only venture capital entities.

The proposed amendment would apply only to Advisers with a place of business in California, and therefore advisers with no offices in California would not be affected. We will continue to monitor developments and will update our clients as further information becomes available.

For more information regarding this topic please contact Richard Lepowsky at (212) 233-3620 or Michael Present at (212) 779-3207.