HEDGE FUNDS
FUNDS TYPES & OFFERINGS: SECURITIES FUNDS
Domestic hedge funds are the most common type of fund. They are known
as domestic funds because they are based in the US, rather than offshore.
When you hear the words “hedge fund,” this is probably what
you’re hearing about.
You probably will want a Rule 506 filing under Regulation D of the Securities
Act of 1933. A fund created under this filing allows you to accept up
to 100 investors (but be careful if you have more than one fund –
the investors from both funds get collapsed into one “bucket”
used for counting the number of investors in your fund). A Rule 506 filing
is unlimited as to the amount you can manage and accept from investors.
In addition, under the National Securities Market Improvement Act (NSMIA)
of 1996, your state filings are greatly simplified.
We find that a Rule 506 filing typically is your most effective and scalable
choice. It’s effective because there is a level of standardization
associated with these filings, which allows your fees to be kept to a
minimum and which is scalable because with one filing, you can bring enough
money under management to make your fund profitable to you. Of course,
we can consider other filing options if those best serve your needs.
For a Rule 506 filing, you must file a Form D with the SEC. This merely
informs the SEC that an offering is underway. The SEC performs no review
of your documents, and the SEC does not give you any “approval”
of your offering documents. There is no fee for filing a Form D.
Under the Patriot Act, signed into law on Oct. 26, 2001, the Treasury
Department is in the process of implementing several procedures to which
all hedge funds must adhere. You will need to have an anti-money laundering
compliance program, and you will need to submit a “notice”
filing to the SEC.
Your SEC Form D and state Blue Sky filings will need to be updated periodically.
The updates provide current information as to the total amount of sales
you have made by state, as well as any other data the states require (varies
by state).
There is a lot of data for you to process to get your fund set up properly.
We make that as easy as possible for you by sending you a “terms
sheet” that defines most of the sections in our standard documents.
These terms change from fund to fund. Using this method allows us to minimize
your fees while still providing you with a customized and fully reviewed
(both by us and by our attorney) set of documents. The terms sheet includes
the following information:
A short description
of the data requested;
A sample from
a composite of hedge funds that we have helped our clients form;
A discussion
of various alternatives that you can consider;
A place for
you to define how you want your fund set up.
We review this data and consult with you regarding your choices. We will
discuss any issue we identify, answer any questions you might have, and
develop the first drafts of your documents. As we refine your choices
and finalize certain information, we generate additional drafts for your
review.
GreenTrader is not a law firm, we work on your hedge fund development
(business, registration, tax and accounting) and utilize outside independent
attorneys (as your liaison).
If you have any questions or would like to get started, please email hedgefunds@greencompany.com
and/or call
us.