Registration; Amendments or Updates to Registration

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1 FEBRUARY 7, 2011 INVESTMENT MANAGEMENT UPDATE Registered Investment Adviser Annual Reviews; Calendar of Certain 2011 Significant Dates for Advisers Investment advisers that are registered with the Securities and Exchange Commission (the SEC ) must comply with certain annual updating and review requirements under the Investment Advisers Act of 1940 (the Advisers Act ). Sidley takes this opportunity to remind investment advisers about certain annual regulatory and compliance obligations as well as certain 2011 significant dates for investment advisers. In addition, recent developments have resulted in renewed focus on certain areas that merit special attention in any investment adviser compliance program review. This overview does not purport to be a comprehensive summary of all of the compliance obligations to which registered investment advisers are subject; please contact your Sidley attorney to discuss these and other requirements under the Advisers Act. Registration; Amendments or Updates to Registration The SEC amended Form ADV (adopting new Part 2, consisting of Part 2A, the brochure, and Part 2B, the brochure supplement(s), to replace old Part II) effective October 12, As of January 1, 2011, new SEC registrants must use the amended Form, including new Part 2A, for filing an application. Registered investment advisers must file an annual updating amendment to their Form ADV; the deadline for mandatory use of new Part 2 varies depending upon the adviser s fiscal year-end. Existing SEC registrants with a fiscal year-end before December 31, 2010 may file an annual updating amendment using either old Part II or new Part 2, while existing SEC registrants with a fiscal year-end on or after December 31, 2010 must file new Part 2. 2 A registered investment adviser must file the annual updating amendment within 90 days of the end of the investment adviser s fiscal year; accordingly, an investment adviser with a December 31, 2010 fiscal year-end must file its annual amendment by March 31, See Sidley Update: SEC Adopts Amendments to Form ADV Part 2 The Investment Adviser Brochure (August 2, 2010) ( ADV Part 2 Update ), available at see also Sidley Update: SEC Delays Compliance Dates for Use and Delivery of Form ADV Part 2B (the Brochure Supplement ) (January 5, 2011) ( ADV Part 2B Extension Update ), available at Form ADV will be further amended pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act ) amendments to the Advisers Act and related SEC rulemaking. 2 Registered investment advisers also must deliver the brochure and pertinent brochure supplements to clients for whom delivery is required. For additional information on brochure and brochure supplement delivery deadlines, see Calendar of Certain Significant Dates in 2011 below. This Sidley update has been prepared by Sidley Austin LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, and One South Dearborn, Chicago, IL 60603, Prior results do not guarantee a similar outcome.

2 Page 2 Part 1 and Part 2A are filed electronically with the SEC via the Investment Adviser Registration Depository ( IARD ) and are available to the public via the Investment Adviser Public Disclosure website. 3 Part 2A, the brochure, is prepared in Adobe Portable Document Format ( PDF ). To be filed, Part 2A must be attached as a PDF to the rest of the IARD filing. Part 2B, the brochure supplement, is not filed with the SEC and is not available to the public. Advisers must preserve copies of the brochure supplement and amendments thereto and provide them to the SEC upon request. Filing Fees Effective January 1, 2011, filing fees for initial registration and annual updating amendments to Form ADV filed through IARD are as follows: 4 Assets Under Management Initial Registration Fee Annual Updating Amendment Fee $100 million or more $225 $225 $25 million to $100 million $150 $150 Less than $25 million $40 $40 Annual Review Rule 206(4)-7 under the Advisers Act (the Compliance Rule ) requires a registered investment adviser to adopt and implement written policies and procedures reasonably designed to prevent a violation of the federal securities laws (including the prevention of a violation of the Advisers Act by the investment adviser and its supervised persons). The Compliance Rule also requires a registered investment adviser to review its policies and procedures at least annually to consider any compliance matters that arose during the previous year, any changes in the business activities of the investment adviser or its affiliates, and any changes in the Advisers Act or applicable regulations that might suggest a need to revise the policies or procedures. The investment adviser also must keep records documenting such annual review. Although the Compliance Rule does not enumerate specific elements that must be included in the required policies and procedures, the Rule s adopting release enumerates areas that an investment adviser s policies and procedures should, at a minimum, address: portfolio management processes; trading practices; proprietary trading of the investment adviser and personal trading activities of supervised persons; the accuracy of disclosures made to investors, clients and regulators; safeguarding of client assets; 3 See Old Part II is not required to be filed with the SEC and is therefore generally not publicly available. Until an investment adviser commences using new Part 2, the investment adviser must keep old Part II updated, provide it to clients in accordance with the requirements in effect prior to the Form ADV amendments and keep updated copies available to provide to the SEC during examinations. 4 State notice filing fees are not included.

3 Page 3 the accurate creation and maintenance of required records; the marketing of advisory services, including the use of solicitors; the process of valuing client holdings and assessing fees based on those valuations; safeguards for the privacy protection of client records and information; and the adoption of a business continuity plan. Periodic Reviews As a matter of best practices, a registered investment adviser s chief compliance officer ( CCO ) should conduct periodic reviews, along with the required annual review, of the investment adviser s compliance policies and procedures to determine their adequacy and the effectiveness of their implementation. This review should take into account any regulatory changes that have occurred since the last review as well as any compliance matters that may have arisen. This review should reflect any changes in the investment adviser s business, including clients, personnel, administrators or any material changes in the business arrangements. The CCO should ensure that the investment adviser s policies are up-to-date and reflect current regulations under the Advisers Act and other relevant regulations. In addition, no less frequently than once in each calendar year, the senior management of the investment adviser should convene a special meeting to review the effectiveness of the investment adviser s compliance policies and procedures. A formal written report summarizing the conclusions of senior management should be filed in the investment adviser s compliance records, together with a memorandum summarizing the responses, if any, made to perceived deficiencies or inadequacies, as well as evaluating the approach taken to any specific compliance problems that may have occurred during the year. Compliance Manual Review An investment adviser s compliance policies and procedures should be documented in a compliance manual that is distributed to all investment adviser employees. All investment adviser employees also should be required to certify annually that they have read (or reread) and understand the manual, including any modifications to or updates of the manual. In addition, investment advisers should address the following at least annually: Privacy Policy Notice to Natural Person Clients and Fund Investors Annual Delivery. Pursuant to Regulation S-P, an investment adviser must provide natural person clients with a privacy notice disclosing the investment adviser s practices for maintaining privacy of client information, both at or before the establishment of the customer relationship and annually thereafter. For a discussion of recent developments regarding privacy regulations, see Other Topical Concerns Privacy Regulation below. Code of Ethics and Prevention of Insider Trading Annual Certificate. All officers and employees of a registered investment adviser should be required to execute and deliver at least annually a certificate certifying that they have read and understood the investment adviser s code of ethics and the investment adviser s written policies and procedures designed to detect and prevent insider trading. Anti-Money Laundering ( AML ) Policy Annual Training. On an annual basis, and more frequently if necessary, all appropriate employees should receive training to ensure that they are knowledgeable about their role in the investment adviser s AML efforts. Such training should address the know-your-customer policy and procedures of the investment adviser and its affiliates, potential indicators of suspicious activity and procedures for reporting such transactions or activities and the civil and criminal penalties associated with money laundering.

4 Page 4 Other Topical Concerns Below is a brief summary of certain recent developments that merit special attention in any investment adviser compliance program review. Registered investment advisers should consider the sufficiency of their current policies and procedures in these areas and the potential need for new or updated policies and procedures. This summary is not comprehensive and does not cover all recent or prospective developments that may be material for investment advisers, under the Advisers Act or other regulatory regimes, including commodity futures regulations and ERISA. Please contact your Sidley attorney with any questions or request for assistance. Pay-to-Play Effective September 13, 2010, the SEC adopted Rule 206(4)-5, which was designed to prevent investment advisers from seeking to influence government officials awards of advisory contracts by making or soliciting political contributions to those officials ( pay-to-play practices). 5 The rule: imposes a two-year time out, with certain exceptions, on receiving compensation for providing investment advisory services to a government client after any one of certain specified persons makes a contribution to certain candidates or elected officials; limits the use of placement agents to regulated persons that are subject to either the rule itself or comparable rules governing political contributions; and bans solicitations or bundling of contributions for certain candidates or elected officials. Rule 206(4)-5 applies to all investment advisers registered, or required to be registered, with the SEC, and investment advisers currently exempt from federal registration under the private adviser exemption. The rule does not apply to most state-registered investment advisers and certain other investment advisers that are exempt from SEC registration. The rule applies with equal force to direct contractual arrangements between an investment adviser and a government entity for advisory services and participation by a government entity in an investment adviser s covered investment pools, which include private investment funds or registered investment companies that are investment options for government plans. Rule 206(4)-5 prohibits an investment adviser from receiving compensation for providing investment advisory services to a government client within two years of any contribution made by the investment adviser or a covered associate to an elected official in a position to direct or influence the investment activities of the government client. The rule generally applies to contributions at the state or local level, and not with respect to federal officials as such. For purposes of the rule, a covered associate of an investment adviser is: any general partner, managing member or executive officer, or other individual with a similar status or function; any employee who solicits government entity clients and any person who supervises such employee; and any political action committee controlled by the investment adviser or any of the above persons. The term executive officer is defined in the rule to include an investment adviser s president, any vice president in charge of a principal business unit or function, any other officer who performs a policy-making function and any other person who performs similar policy-making functions for the investment adviser. 5 Political Contributions by Certain Investment Advisers, Advisers Act Release No (July 1, 2010); see Sidley Update: SEC Adopts Rule to Eliminate Pay-to-Play Practices (July 6, 2010), available at

5 Page 5 The application of Rule 206(4)-5 is broad and goes beyond straightforward campaign contributions. Anything of value that is provided to influence the election for a federal, state or local office, such as donations to assist in paying the debts of a previous campaign, may trigger application of the rule. Application of the rule would also be triggered by contributions to pay a portion of the expenses associated with an inauguration or organizing a fundraiser for a candidate or officeholder. Under the rule, any placement agent or other third party retained to solicit government clients must be a regulated person. Regulated person is defined as a person or entity subject to regulation by a national securities regulator, e.g.: a broker-dealer registered with the SEC and a member of a national securities association, which currently would include only the Financial Industry Regulatory Authority ( FINRA ), if the rules of the association prohibit members from engaging in distribution or solicitation activities if certain contributions have been made and the SEC has found that the rules impose substantially equivalent or more stringent restrictions on broker-dealers than the rule imposes on investment advisers and are consistent with the objectives of the rule; or an investment adviser registered with the SEC that has not, and whose covered associates have not, within two years of soliciting a government entity, made a contribution to an official of that entity, other than a de minimis contribution, or coordinated or solicited any political contribution. In response to changes made by the Dodd-Frank Act, the SEC also proposes to amend the pay-to-play rule under the Advisers Act. The proposed amendments would: amend the scope of the rule to include exempt reporting advisers and foreign private advisers; and permit an investment adviser to pay a registered municipal advisor, instead of a regulated person, to solicit government entities on its behalf, provided the municipal advisor is subject to a pay-to-play rule adopted by the Municipal Securities Rulemaking Board that is at least as stringent as the investment adviser pay-to-play rule. Lobbyist Registration Investment advisers, their employees and placement agents also may be subject to state and local registration of lobbying activities in connection with solicitation of investments by state or municipal pension plans or other governmental entities. In addition, lobbyists and lobbyist employers may be subject to ongoing reporting obligations, restrictions on the amount and type of compensation payable in connection with lobbying activities, restrictions on contributions and gifts to public officials, penalties associated with violations of lobbying laws and regulations and other requirements. 6 In particular, recent developments in California and New York City may require prompt action with regard to registration, reporting and ongoing compliance. California Effective January 1, 2011, California laws governing lobbyists were amended by Assembly Bill 1743 ( AB 1743 ) to cover the process by which investment managers and private investment funds obtain business from California s public pension plans. AB 1743 operates principally by defining the formerly familiar term placement agent in a new, expansive fashion and treating these newly-defined placement agents as lobbyists for certain purposes. Through this approach, it can be said to have the following effects: 6 See Sidley Update: Lobbyist Regulations Impact on Investment Managers California, New York and Beyond (February 1, 2011) ( Lobbyist Update ), available at

6 Page 6 Subject to limited exceptions, it subjects individuals including internal investment manager personnel and entities that are involved in soliciting or finding investment management business (including fund investments) from California state public retirement systems (e.g., the University of California System, CalPERS or CalSTRS) to California s state lobbyist regulatory regime, including: registration requirements; gift, payment and contribution reporting requirements; and substantive limitations on gifts, payments and contributions as well as contingent compensation. Persons required to register must do so before contacting a state public retirement system. With more limited exceptions, it subjects individuals and entities involved in soliciting or finding activities as to local public retirement systems (e.g., the Los Angeles County Employees Retirement Association) to local lobbyist registration, reporting and substantive requirements and restrictions. These differ from the state-level requirements and differ significantly from jurisdiction to jurisdiction. Indeed, not all sizeable cities and counties have local lobbying laws (e.g., the city and county of San Bernardino). It expands the coverage of rules that public retirement system boards are required to implement governing disclosure of placement agent compensation and related matters; those rules will now cover the broader range of personnel and entities within the new definition of placement agent. New York City Under New York City laws and regulations, attempts by persons including placement agents, other third parties retained by investment firms and employees of investment firms to influence the decisions of the Comptroller, or members of his staff, or the boards of trustees of the City s five pension funds, or members of their staffs, or individual members of such boards, with respect to the investments of those funds, are lobbying and are subject to the provisions of the Administrative Code regulating lobbyists. 7 A lobbyist can be an individual or an organization paid to lobby by a client. An individual can be a lobbyist for the organization that employs that individual. New York City s Lobbying Bureau has advised: When a Lobbyist reasonably anticipates that in the coming year [he] will earn, receive, or expend over $2,000 in compensation and expenses combined, for lobbying in New York City, the Lobbyist is required to file a Statement of Registration. 8 Compensation for lobbying paid to salaried employees is determined by the portion of the employee s time that is devoted to lobbying. An employee paid $200,000 per year would be required to register based on salary alone if he spent 1% of his time lobbying. Thus, the time spent in these activities would be counted to determine whether an individual meets the $2,000 threshold. These broad principles suggest that individuals employed by hedge funds and private equity funds in a sales capacity (which may include, for example, investor relations and business development) will likely be required to register, although certain narrow exemptions in the New York City Administrative Code may protect some individuals from having to do so. See Calendar of Certain Significant Dates in 2011 below for deadlines in connection with lobbyist registration in California and New York City. Privacy Regulation SEC Regulation S-P and Federal Trade Commission ( FTC ) privacy regulations require investment advisers and funds to provide a privacy notice to clients and fund investors who are natural persons describing the entity s privacy policies and practices. The regulations prohibit investment advisers from providing non-public personal customer information to unaffiliated third parties, other than service providers that need access to that information in order to permit the investment adviser to conduct its business, unless customers first have been provided with an initial privacy notice, 7 Opinion of Michael A. Cardozo, Corporation Counsel of The City of New York (March 31, 2010). 8 Law Governing Lobbying, Office of the City Clerk, Lobbying Bureau, The City of New York, available at

7 Page 7 offering the customer the option of withholding consent to such information sharing (an opt out ). Annual notices must be sent thereafter. The notice must include a general description of the categories of customer information collected and disclosed, the categories of affiliates or non-affiliates that may receive such information, an explanation of the customer s right to opt out of having such information shared, instructions on how to exercise this right and a description of the investment adviser s policies and procedures designed to protect the security and confidentiality of client and investor information. On April 15, 2010, eight Federal regulators released an Online Form Builder that financial institutions may download and use to develop and print customized versions of a model privacy form developed by the regulators. This new model privacy form provides a legal safe harbor for its users, although investment advisers are free to use any privacy notice that conforms with the applicable rules. 9 SEC Regulation S-AM restricts the ability of affiliates to use certain information obtained from other affiliates to make marketing solicitations to individual clients. 10 Depending on the circumstances of an investment adviser, the investment adviser s privacy policy and privacy notice may need to include provisions reflecting the restrictions these measures put in place. Massachusetts has adopted information security regulations to protect certain information of Massachusetts residents. Under the Massachusetts regulations, an investment adviser that has clients or fund investors who are natural persons resident in Massachusetts must implement a written information security program (as described in the regulations) to protect records that contain certain non-public personal information about those clients or investors. Significantly, these regulations require several specific information security controls, such as the use of encryption during the transmission of covered personal information and when it is stored on portable media. As of March 1, 2010, any new contract entered into by an investment adviser with any service provider that may store, process or have access to covered personal information must include a provision designed to meet the requirements of the Massachusetts regulations. All existing contracts must be revised to include such a provision by March 1, As of January 1, 2011, certain creditors and financial institutions that offer covered accounts 12 to investors or maintain such accounts are subject to an FTC identity theft prevention rule (the Red Flags Rule ). 13 The rule requires that such creditors and financial institutions take steps to detect, prevent and mitigate the effects of identity theft. Firms to which the rule applies must undertake an analysis of their vulnerability to identity theft by detecting red flags and developing and implementing a written identity theft prevention program designed to address the risks. The Red Flags Rule may apply to some investment advisers. 14 Even investment advisers technically not required to comply with the Red Flags Rule may choose to observe some of its requirements as a matter of best practices See Federal Regulators Release Model Consumer Privacy Notice Online Form Builder, available at 10 See Regulation S-AM: Limitations on Affiliate Marketing, Advisers Act Release No (August 4, 2009); Regulation S-AM: Limitations on Affiliate Marketing; Extension of Compliance Date, Advisers Act Release No (November 5, 2009) (extending the compliance date to June 1, 2010). 11 See Sidley Update: State Information Security Regulations: Massachusetts Information Security Regulations Reach Final Form (December 18, 2009), available at 12 Defined as (1) an account primarily for personal, family or household purposes, that involves or is designed to permit multiple payments or transactions, or (2) any other account for which there is a reasonably foreseeable risk to customers or the safety and soundness of the financial institution or creditor from identity theft. 13 See Identity Theft Red Flags and Address Discrepancies Under the Fair and Accurate Credit Transactions Act of 2003, 72 Fed. Reg. 63,718 (November 9, 2007) (codified at 16 C.F.R (2011)) available at 14 The FTC has published a general guide to the Red Flags Rule that can be found at fighting-fraud-red-flags-rule-how-guide-business. For businesses at low risk for identity theft, the FTC has published a guide that can be found at

8 Page 8 Section 210(c) of the Advisers Act prohibits the SEC from requiring an investment adviser to disclose the identity, investments or affairs of any of its clients, except as necessary or appropriate in a particular enforcement investigation or proceeding. The Dodd-Frank Act amended Section 210(c) to provide a new exception from this prohibition for purposes of assessment of potential systemic risk. Social Networking Policies and Procedures The SEC and other regulators recently have shown increased interest in how investment advisers and their employees make use of social networking media and in their related policies and procedures. The most significant issues regarding an investment adviser s use of social networking are record-keeping and supervisory capacity and whether technology has evolved sufficiently to allow implementation of the extensive and required compliance safeguards. It is important that each investment adviser evaluate these questions and develop policies and procedures that reconcile business goals in the use of social media to regulatory and compliance requirements. FINRA has issued a Regulatory Notice which provides guidance to securities firms and brokers regarding the use of social networking websites for business purposes. Investment advisers differ in their approaches to the use of social media for business purposes. Some value the marketing opportunities that social networking offers and want to incorporate its use into their regular business practices. Others prefer to prohibit its business use altogether. Regardless of an investment adviser s position concerning the business use of social networking, each investment adviser must develop policies and procedures in connection with social networking, train its employees accordingly, implement appropriate compliance safeguards and monitor actual social networking practices within the firm. Use and prohibitions on the use of social media by an investment adviser and its employees and the implementation of attendant policies and procedures have implications for a number of compliance areas, including privacy policies, restrictions on advertising and publicity, record-keeping requirements and supervision of employees. Private Fund Systemic Risk Reporting Pursuant to a mandate in the Dodd-Frank Act, on January 26, 2011, the SEC proposed rules to require private fund advisers registered or required to be registered with the SEC to file periodic confidential reports for use by the Financial Stability Oversight Council to monitor risk to the U.S. financial system. 15 The rule proposal includes a new Form PF for the periodic filings. All private fund advisers registered or required to be registered with the SEC would be required to file Form PF at least annually and report basic information on such matters as the adviser s assets under management (both total and net, in the aggregate and by type of fund or other account), and, as to each private fund, gross and net assets, leverage, creditors, derivative positions, investor concentration and fund performance and, with respect to any hedge funds advised, additional information on such matters as investment strategies, trading counterparties and trading and clearing mechanisms. Large private fund advisers registered or required to be registered (with $1 billion or more in hedge fund, liquidity fund or private equity fund assets under management) would be required to provide additional information and file Form PF on a quarterly basis. The SEC indicated in the proposing release that it does not intend to make public Form PF information identifiable to any particular adviser or private fund, but it may use Form PF information in an enforcement action Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF, Advisers Act Release No (January 26, 2011) ( Form PF Proposing Release ), available at 16 See Form PF Proposing Release, at footnote 15 above, at 14.

9 Page 9 The SEC s proposed rule is part of a joint proposal with the Commodity Futures Trading Commission (the CFTC ). Commodity pool operators or commodity trading advisors that are dually registered with the SEC and advise private funds also would be required to file Form PF to comply with certain reporting obligations proposed by the CFTC. Calendar of Certain Significant Dates in 2011 January 1 January 1 New registrants filing Form ADV on or after this date must use the Form as amended effective October 12, Initial registration deadline under California s new lobbying law for persons marketing to public retirement systems in that state 18 January 24 Deadline for comments on the SEC s November 19, 2010 rule proposals 19 January 26 The SEC and the CFTC propose private fund systemic risk reporting rule 20 February 14 February 15 March 14 March 31 May 1 (or effectiveness, if later) May 27 May 30 July 1 Filing deadline for Schedule 13G update, if required, and initial Form 13F, if required Initial registration deadline (extended from January 1, 2011) for persons subject to New York City s lobbying law engaged in solicitation of investments by New York City s pension funds 21 Compliance date for the SEC s pay-to-play rule (Rule 206(4)-5) and related recordkeeping requirements (with certain exceptions; see September 13 deadline below); contributions made on or after this date are subject to the pay-to play rule Deadline for existing registrants with a December 31 fiscal year-end to file their annual amendment to Form ADV, including new Part 2A 22 An investment adviser applying to register for the first time between January 1 and April 30, 2011 must begin delivering brochure supplements to new and prospective clients 23 Effective date of new FINRA Rule 5131 relating to allocation of IPOs (new issues) to certain executive officers and/or directors as well as to certain persons who are materially supported thereby 24 Deadline for registered advisers with a December 31, 2010 fiscal year-end to deliver new brochure (using new Part 2A) to existing clients 25 Deadline for an investment adviser applying to register for the first time between January 1 and April 30, 2011 to deliver brochure supplements to existing clients See ADV Part 2 Update at footnote 1 above. 18 See Lobbyist Update at footnote 6 above. 19 See Sidley Update: SEC Proposes Rules Implementing Dodd-Frank Requirements for Private Fund Advisers (November 23, 2010) ( Private Fund Adviser Update ), available at 20 Form PF Proposing Release at footnote 15 above. 21 See Lobbyist Update at footnote 6 above. 22 See ADV Part 2 Update at footnote 1 above. 23 See ADV Part 2B Extension Update at footnote 1 above. 24 See Sidley Update: FINRA Adopts Effective Date for New FINRA Rule 5131 to Address Certain Abuses in the Allocation and Distribution of IPOs (January 6, 2011), available at 25 See ADV Part 2 Update at footnote 1 above. 26 See ADV Part 2B Extension Update at footnote 1 above.

10 Page 10 July 21 July 31 August 20 August 20 September 13 September 30 October 19 Effective date of the Dodd-Frank Act amendments to the Advisers Act; deadline for registration by advisers that had relied upon the private adviser exemption eliminated by the Dodd-Frank Act and for whom no other exemption is available 27 An adviser with a fiscal year end of December 31, 2010 through April 30, 2011, that was registered with the SEC as of December 31, 2010, must begin delivering brochure supplements to new and prospective clients 28 Proposed deadline for filing of initial report on Form ADV by advisers that are exempt reporting advisers as of July 21, 2011 Proposed deadline for each adviser registered with the SEC as of July 21, 2011 to file an amendment to its Form ADV to report the market value of its assets under management, determined within 30 days of the filing, and determine whether the adviser meets the revised eligibility criteria for SEC registration (see October 19 deadline below) 29 Compliance date for the SEC s pay-to-play rule (Rule 206(4)-5) and related recordkeeping requirements for investment advisers with respect to registered investment companies that are covered investment pools; compliance date under Rule 206(4)-5 for the prohibition on payments to certain third parties to solicit government entities for investment advisory services Deadline for an investment adviser with a fiscal year end of December 31, 2010 through April 30, 2011, that was registered with the SEC as of December 31, 2010, to deliver brochure supplements to existing clients 30 Proposed deadline for registration in the applicable state(s) (and registration of associated persons as investment adviser representatives, as necessary) and withdrawal of SEC registration by advisers no longer eligible to remain SEC-registered as determined by the August 20 deadline See Private Fund Adviser Update at footnote 19 above. 28 An existing registered adviser with a fiscal year ending after April 30, 2011 must begin delivering brochure supplements to new and prospective clients upon filing its annual updating amendment to Form ADV and deliver brochure supplements to existing clients within 60 days of filing the annual updating amendment. See ADV Part 2B Extension Update at footnote 1 above. 29 See Private Fund Adviser Update at footnote 19 above. 30 See ADV Part 2B Extension Update at footnote 1 above. 31 See Private Fund Adviser Update at footnote 19 above.

11 Page 11 If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work. The Investment Management Practice of Sidley Austin LLP Sidley has a premier, global practice in structuring and advising investment funds and advisers. We advise clients in the formation and operation of all types of alternative investment vehicles, including hedge funds, fund-of-funds, commodity pools, venture capital and private equity funds, private real estate funds and other public and private pooled investment vehicles. We also represent clients with respect to more traditional investment funds, such as closed-end and open-end registered investment companies (i.e., mutual funds) and exchange-traded funds (ETFs). Our advice covers the broad scope of legal and compliance issues that are faced by funds and their boards, as well as investment advisers to funds and other investment products and accounts, under the laws and regulations of the various jurisdictions in which they may operate. In particular, we advise our clients regarding complex federal and state laws and regulations governing securities, commodities, funds and advisers, including the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Securities Act of 1933, the Securities Exchange Act of 1934, the Commodity Exchange Act, the USA PATRIOT Act and comparable laws in non-u.s. jurisdictions. Our practice group consists of approximately 150 lawyers in New York, Chicago, Los Angeles, San Francisco, London, Hong Kong and Singapore. BEIJING BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA HONG KONG LONDON LOS ANGELES NEW YORK PALO ALTO SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C. Sidley Austin LLP, a Delaware limited liability partnership which operates at the firm s offices other than Chicago, London, Hong Kong, Singapore and Sydney, is affiliated with other partnerships, including Sidley Austin LLP, an Illinois limited liability partnership (Chicago); Sidley Austin LLP, a separate Delaware limited liability partnership (London); Sidley Austin LLP, a separate Delaware limited liability partnership (Singapore); Sidley Austin, a New York general partnership (Hong Kong); Sidley Austin, a Delaware general partnership of registered foreign lawyers restricted to practicing foreign law (Sydney); and Sidley Austin Nishikawa Foreign Law Joint Enterprise (Tokyo). The affiliated partnerships are referred to herein collectively as Sidley Austin, Sidley, or the firm.