Whether you need a license to run an investment fund depends on size, type, and fees. Funds under $150 million register as state advisors; over $150 million must register with the SEC. Funds between $25 million and $150 million can qualify as Exempt Reporting Advisors to skip the Series 65 license.
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Do you need a license to run an investment fund? I got this question on YouTube. I run 2 8-figure funds and we're going to answer this question in 2 minutes or less. So the first answer is it depends and it depends on what. So the first thing is the fund type that you are doing. If you're doing a hedge fund, for example, you are more regulated than a venture capital fund is less regulated. Apparently these guys have better, you know, I guess lobbyists, I guess, but down the line it will depend on what type of assets you are buying in your firm. Furthermore, it depends on how large your fund is as well. So in a fund, typically you file in the United States, you have 3 different buckets. Number one here is what's called an investment advisor, an IA. This is when you're under $150 million, you file at the state level, and each state has different rules on what to file with. You can go look up your state laws if you're in Kentucky or California or New York. It will tell you if you need a Series 65 license or not. Once you get over $150 million right here, you then file with the federal level under the SEC. And almost always you'll need a Series 65 to run a fund. That would be the license that you would need. Now furthermore, if you're in this camp between $25 million and $150 million of AUM, you actually can file as an exempt reporting advisor. Currently my fund files as an exempt reporting advisor and we in our state, and we've been advised we do not need a Series 65. Again, check with your attorneys and on your state-specific level. The last thing I'll add is the types of fees you charge in a fund. As you guys know, there's 2 main fees that are charged in funds: performance fees and management fees. In my first fund that I launched, we did not charge any management fees and we did not have a management company. Because of that, we were not getting money for investment advice because we were just earning money on performance fees. Our attorneys advised us we did not need a license to run this fund. So again, to recap, depending on the types of fees you charge, performance fees or management fees, depending on the size of your firm, if you're under $150 million or over $150 million, or if you can qualify as an exempt reporting advisor. Furthermore, what type of fund you are running. A hedge fund is generally going to be more regulated and a venture capital fund is going to be less regulated. Hopefully that's useful. Let me know down in the comments.
