New Jersey Considers

Hedge Fund Adviser Registration

A bill recently introduced to the New Jersey legislature proposes to require the registration of certain previously exempt advisers and intends to require registration of certain advisers that deal in hedge funds.

Under New Jersey’s current law, an investment adviser must register with the state if their principal place of business is in New Jersey or if it does not have a business location in New Jersey but has more than five clients who are residents of the state.  The proposed law change seeks to eliminate the current deminimus exemption and require any person who acts as an investment adviser in New Jersey to register as an investment adviser with the state’s Bureau of Securities (regardless of the number of clients) unless they qualify for another exemption.  It is not known what, if any, grace period the state intends to offer to investment advisers currently claiming this exemption.

The second component of the bill alludes to hedge fund advisers being required to register as investment advisers with the New Jersey Bureau of Securities.  The proposed law change, however, does not specify which advisers to hedge funds would need to register.  A statement published by the state only implies that “certain” advisers who “may” be dealing in hedge funds “may” be required to register with the state as an investment adviser.  

In recent months, there has been much speculation about whether individual states would pass legislation requiring hedge fund managers to register as investment advisers after the SEC’s hedge fund adviser registration rule was overturned by the DC Circuit Court of Appeals earlier this year.  Several states already require hedge fund advisers to register as investment advisers within their jurisdiction.  If this new bill is signed into law, New Jersey may be the first state to pass legislation regulating hedge fund advisers since the SEC was vacated.

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