In October of 2007, we sent an alert regarding a proposal by the California Department of Corporations to change an investment adviser exemptive rule so as to, in effect, require hedge fund managers with an office in California to become registered with either the State of California or the SEC.  This was of particular concern to larger investment advisers (more than $25 million under management) who rely on the SEC's "private adviser" exemption (for advisers who do not hold themselves out to the public as investment advisers and who have fewer than 15 "clients" in any 12-month period) and who have an office or are contemplating establishing an office in California.

Today, the Department of Corporations officially announced that, in light of comments it had received and of ongoing actions at the federal level, "it has decided not to proceed" with the proposal, characterizing the proposal as "premature at this time."  To download a copy of the Department's notice, click here.

Howard Rice was involved in responding to the proposal, including in the preparation of a comment letter submitted by the Corporations Committee of the Business Law Section of the State Bar of California that noted, among other things, factors the Department cited as contributing to its decision.  We are pleased to report the Department's decision.