Answers to Common SPV Compliance Questions

by Chris Tabb

Special Purpose Vehicles (SPVs) are becoming an increasingly popular way for businesses to manage and monetize assets, but they also come with their own set of compliance requirements.

Staying on top of SPV compliance requirements can be a challenge for companies, which is why we've compiled a list of the most frequently asked SPV compliance questions, and answered them with the help of our team of experts.

Whether you're just getting started with an SPV or are looking to ensure that your existing one is in compliance, this guide will give you the insight and advice you need to stay informed and compliant.

To raise capital for my SPV, I am using Rule 506(b). This rule allows up to 35 non-accredited investors to invest in the opportunity. While all investors will be accredited investors, I have some close friends and family who want to invest but are not accredited. Is this possible?

Rule 506(b) of Regulation D under the Securities Act of 1933 allows companies to raise an unlimited amount of capital by selling securities to an unlimited number of accredited investors and up to 35 non-accredited investors. However, these non-accredited investors must be "sophisticated" which generally requires that they have enough knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.

To circumvent the Section 3(c(1)(1) investor limit, can I create multiple SPVs?

The investor limit that you're mentioning is Section 3(c)(1) of the Investment Company Act of 1940, which limits the number of investors that a company can have to less than 100 before it is considered to be an "investment company" and would be subject to strict regulation by the SEC.

Creating multiple Special Purpose Vehicles (SPVs) in order to circumvent the Section 3(c)(1) investor limit, is a strategy sometimes used by companies. However, the SEC may take a close look into the situation to confirm if the SPVs are really separate entities and not just an attempt to circumvent the limit.

If the SEC determines that the SPVs are not truly separate entities, but rather an attempt to avoid regulation, it could consider them to be a single entity for regulatory purposes, and the investors limit would still apply.

Can an SPV/feeder fund be set up to invest in an institutional fund?

Yes, it is possible to set up a Special Purpose Vehicle (SPV) or feeder fund to invest in an institutional fund. An SPV or feeder fund is a separate legal entity that is typically used to pool capital from multiple investors in order to invest in a specific asset or set of assets, such as an institutional fund.

An institutional fund is a type of investment fund that is typically targeted at large, institutional investors such as pension funds, endowments, and other large financial institutions. An institutional fund is usually open to investors who meet certain minimum investment requirements and often have lower fees and expenses than other types of investment funds.

When an SPV or feeder fund is set up to invest in an institutional fund, it acts as a vehicle for individual or retail investors to invest in that fund and share in its returns. The investors in the SPV or feeder fund become limited partners in the SPV and the institutional fund, and have no direct involvement in the management or control of the institutional fund.

However, it is important to note that the institutional fund may have certain requirements for its investors, such as minimum investment amounts and/or accreditation requirements, and those requirements must be met by the SPV or feeder fund investors. 

What do I need to do to register as an exempt reporting or investment adviser?

Exempt reporting advisers and investment advisers are subject to different registration requirements depending on the jurisdiction in which they operate.

However, there are some general steps that you can take to register as an exempt reporting or investment adviser:

Determine if you meet the qualifications for an exempt reporting or investment adviser

The qualifications for exempt reporting advisers and investment advisers are different, and it's important to determine which category you fall under before proceeding with registration.

Complete the appropriate paperwork

You will typically need to file Form ADV with the Securities and Exchange Commission (SEC) and/or the appropriate state regulatory agency, depending on your location and the number of clients you have.

Provide required disclosures

Depending on your jurisdiction, you may be required to provide disclosures about your business, investment strategies, and any potential conflicts of interest to your clients.

Obtain any required licenses or certifications

In some jurisdictions, you may be required to obtain a professional license or certification to operate as an exempt reporting or investment adviser.

Register with the appropriate state securities regulator if necessary

Some states may have their own registration requirements for investment advisers, and if you are based in those states, you will be required to register with the state securities regulator.

Maintain compliance with ongoing reporting and regulatory requirements

Once you're registered, you'll need to file annual or periodic updates with the SEC and/or state regulatory agency and maintain compliance with all applicable laws and regulations.

Streamline Your SPV Compliance Requirements

Hopefully this guide has given you the information and advice you need to make sure your Special Purpose Vehicle is compliant, whether you're just getting started or are looking to ensure that it remains in compliance.

Take Action and Get Started with Syndicately 

Now it's time to take action and make use of the resources available to you, such as using the Syndicately platform to simplify and streamline your SPV compliance requirements.

With Syndicately, you can easily track and manage your SPV compliance requirements in one place, giving you peace of mind that you're protecting yourself, your investors, and your business. So don't delay - get started today with Syndicately and ensure that your SPV remains compliant.

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