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The Devil is in the Details Part 7: Blue Sky Exemptions for Private Fund Managers

In this installment of Hardin’s “Devil is in the Details” series on state blue sky filings for private fund managers, we dig into common exemptions from blue sky filing requirements.  Links to other posts in this series are included at the end of this article.

Submitting a blue sky filing in every state where a private fund has an investor is one way to try to simplify the management of complex state blue sky laws, but it is not always the best answer.  It can be a waste of resources, time and money, and bring unnecessary regulatory attention your way.  Here are the most common exemptions from state filing requirements:

  1. Limited Private Offering Exemptions – Some states do not require a blue sky filing until the fund has a minimum number of investors in that state.  Other states add a time-frame requirement, such as a minimum number of investors within a 12-month period.  The applicability of this exemption and the minimum number of investors varies by state.  Some states have additional requirements, such as mandating specific disclosures in the fund offering documents.  These de minimis thresholds must be monitored as additional investors subscribe to the fund.  In some states, an initial filing is not required at the time of the first sale but must be made when the minimum number of investors is met or surpassed (depending on the language used by the state).
  1. Institutional Investor Exemption – This exemption can be confusing because although most states define Institutional Investor within their securities laws, not all of those definitions apply to blue sky filings.  To avoid running afoul of the filing requirements, private fund managers need to drill deep to determine whether the exemption applies to their funds.  An initial blue sky filing is not required when the first investor in a state meets an applicable Institutional Investor definition and exemption.  But as the fund takes on more investors, the blue sky filing requirements have to be reviewed to determine whether to make that initial filing.

When Hardin finds an applicable exemption, we will present you with a filing recommendation based on the law, but ultimately it remains your decision whether we make a filing on your behalf.  Hardin’s role is twofold: first, we will provide you with research and relevant information so you can make informed decisions, and second, we will either submit the filing on your behalf or document the applicable exemption or reasoning for not filing.

By engaging Hardin to handle your Blue Sky Filings, we will conduct the required state research and make recommendations based on our findings.  We review the blue sky laws for each state, look for applicable exemptions, monitor de minimis thresholds, and keep track of required amendments and renewal for you.  For more information or to contact the Blue Sky Filing Team, check out this summary of Hardin’s Blue Sky Filing Service.

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Have a compliance question or want to outsource your blue sky filings?  Hardin Compliance can help!  Call us today at 1.724.935.6770, or visit our website at www.hardincompliance.com for more information.



Hardin Compliance Consulting provides links to other publicly-available legal and compliance websites for your convenience. These links have been selected because we believe they provide valuable information and guidance.  The information in this e-newsletter is for general guidance only.  It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting of any kind.

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