The syndicate lead "Lead Partner" can only charge a Management Fee if they are registered with FINRA as an investment adviser under the Investment Advisers Act or if they are an adviser that is an Exempt Reporting Adviser "ERA".

The main exemptions are:

1. The Private Fund Adviser Exemption

This exemption is available to U.S.-based investment advisers that:

  • Solely manage private funds, and

  • Have less than $150 million in assets under management (AUM) across all funds managed by the investment adviser.

2. The Venture Capital Adviser Exemption:

This exemption is available to investment advisers that solely advise venture capital funds (as specifically defined in the Advisers Act).


To qualify as a venture capital fund and entitle the fund’s investment adviser to rely on the venture capital advisor exemption, a fund must meet the following criteria:

  • Representation. A fund must represent itself as pursuing a “venture capital strategy,” including in investor and marketing materials,

  • Leverage limitations. A fund must meet the strict limitations imposed on the use of leverage at the portfolio company and fund levels,

  • Redemptions. A fund must prohibit redemptions by investors (having their shares repurchased by the fund) except in extraordinary circumstances, and

  • Qualifying investments. At least 80% of a fund’s investments must be direct equity investments into private companies, or other “qualifying” investments (including options to purchase such direct equity investments or notes convertible into such equity).

Non-qualifying investments include investments in other funds (e.g., “fund of funds”), public companies, and secondary investments.

Violation of these requirements could result in loss of an investment adviser’s ability to rely on an exemption from registration.

Vauban provides no legal advice and recommends that all syndicate leads consult with an attorney.

https://www.sec.gov/divisions/investment/guidance/private-fund-adviser-resources

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