TLDR:
- Securities laws fundamentals for venture capital fund managers are important for understanding the legal requirements
- Three main statutory regimes to know include the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the Securities Act of 1933
If you’re starting out as a new firm and raising your first fund, it’s crucial to familiarize yourself with securities laws principles. The Investment Company Act of 1940 applies to the fund, determining whether registration as an investment company is required. The Investment Advisers Act of 1940 applies to the management company, governing registration as an investment adviser. The Securities Act of 1933 applies to fundraising, determining whether the sale of fund interests must be registered as a securities offering.
Most venture capital funds rely on exemptions from all three statutory regimes. For example, to be a private fund exempt from the Investment Company Act, a VC fund can rely on Section 3(c)(1) or Section 3(c)(7). The Advisers Act applies to investment advisers, and the VC exemption is commonly used by VC fund managers. Under the Securities Act, private offerings often rely on Regulation D and the 506(b) offering exemption.
State requirements and considerations for fundraising outside the US are also important for VC fund managers to understand. Overall, becoming familiar with key securities laws principles is essential for navigating the legal landscape of venture capital fund management.
