What is an Exempt Reporting Adviser (ERA)?

Updated 4 months ago by Sanjay Vora

Avestor does not provide legal services. Please use the below information as educational. Federal and state regulatory rules are constantly getting updated so please consult your attorney for final direction on ERA registration requirements.


Lets start with the basics. What is an investment adviser?

Per SEC guidance (https://www.investor.gov/introduction-investing/investing-basics/glossary/investment-adviser)

An investment adviser is a

  • firm or person
  • that, for compensation, engages
    • in the business of providing investment advice to others about the value of or about investing in securities – stocks, bonds, mutual funds, exchange traded funds (ETFs), and certain other investment products

For a private fund, the management entity is guiding the private fund on what to invest the fund capital into so it is considered a "Private Fund Adviser". Given that, the fund entity is a client of the management entity, not the individual investors in the fund.* The exception to this is if your private fund has an agreement in place with an Investment Adviser (IA) and compensate them to provide your fund guidance.

Under the Investment Advisers Act of 1940, investment advisers, including advisers to private funds must register with the Securities and Exchange Commission (SEC) or with the state that the management company is operating from. If the management entity is managing funds with less than $25 million in assets, the SEC prohibits registering with them so they must evaluate state rules.

*Washington state has a look through rule where investors in the fund must be counted. We are not aware of other states with a similar rule but its best to check with your attorney for latest guidance.

So what is an Exempt Reporting Adviser (ERA)?

An exempt reporting adviser is an investment adviser that is not required to register with the SEC or with state securities authorities but is required to file an annual report using a truncated version of Form ADV. The requirement to file such annual report arises from the private fund adviser exemption and/or the venture capital adviser exemption.

Certain private fund advisers (ie. your manager entity) are exempt from such registration. While being exempt from registration, many of these exempt private fund advisers are still required to file annual reports as an “exempt reporting adviser” using a truncated version of Form ADV (the same form used to register as an investment adviser). In addition, many states also require private fund advisers exempt from registration under state law to file the same annual reports as an exempt reporting adviser.

When may you be required to become an ERA?

1) If you are managing a Venture Capital (VC) fund unless your state has a VC fund exemption

2) If you are utilizing a 3(c)(1) exemption and have less than $150 million in assets under management

3) You are utilizing the small adviser exemption (less than $25 million in assets under management) but the state follows the NASAA Registration Exemption for Investment Advisers to Private Funds Model Rule. If the state uses that rule, you may be required to still register.

If you are operating in a state that does not follow the NASAA rule and you are less than $25 million in assets, you likely will not be required to register as an ERA.

This is complex. How do I figure out if I need to register and in what state?

1) Determine which state your management entity is operating in (not formed in). For example, you may have formed your management entity in Delaware but that is not the state you are operating in. If you do not have a physical office or employees, you have more flexibility to select the state.

2) Ask your attorney to guide you on the private fund adviser rules in that state.

3) If your attorney determines you need to register as a ERA, then you can request them to file the ADV for you or do it yourself using the instructions provided in our support here.

What information is required to be filed as an ERA?

  • Identifying information about the fund, the fund managers and place of business
  • Which exemption you are utilizing
  • How and where you are organized
  • Other business activities that you may have
  • Information about your fund
  • Control persons - these are primary executives
  • Disciplinary items - if you have any disciplinary history with the SEC or states

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