The term Exempt Reporting Adviser, or ERA, can be misleading.
An Exempt Reporting Adviser (ERA) is exempt from registering with the SEC as an investment adviser, but the exemption does not remove the adviser from the Investment Advisers Act or SEC oversight. Antifraud provisions, reporting obligations, examination authority and other requirements continue to apply. It is important to remember that while it is not a registered investment adviser, an ERA is still a fiduciary, along with all of the attendant obligations that come with that role.
Many ERAs operate with a smaller compliance infrastructure than a fully registered investment adviser. Some may have no compliance infrastructure at all. This is because an ERA is not required by SEC Rule 206(4)-7 to maintain the formal compliance program required of an SEC-registered adviser, conduct the annual review required by that rule, or designate a Chief Compliance Officer. Form ADV itself contemplates that an ERA may operate without a CCO.
At DFP Partners, we work with ERAs in much the same way we work with registered investment advisers, with the scope adjusted to the requirements and risks that actually apply to the firm. Some ERAs voluntarily designate a CCO, and we can support that person just as we would the CCO of an RIA. In other cases, DFP can serve in an outsourced CCO capacity. We have noted that some ERAs may have this structure because the entities they wish to work with require it as part of that potential client's due diligence requirements.
Where an ERA does not designate a CCO, we can work directly with the managing member, general partner or other senior principal the firm has assigned responsibility for compliance.
Most importantly, DFP's support includes continued monitoring for compliance with the conditions that allow the firm to remain exempt from SEC registration.
What Makes an Entity an ERA?
The current framework largely came out of the Dodd-Frank Act, which eliminated the former broad private adviser exemption and established a more defined regulatory structure for private fund and venture capital fund advisers.
The two exemptions availed under the ERA status include the venture capital fund adviser exemption and private fund adviser exemption. Advisers relying on either exemption file an abbreviated Form ADV, submitted to the SEC, making notice that it is relying on an exemption from registration.
Dodd-Frank also established the foreign private fund adviser exemption under Section 203(b)(3). A foreign private adviser relying on that exemption is not an ERA and does not file Form ADV merely by virtue of the exemption.
Venture Capital Fund Advisers
Section 203(l) exempts an adviser that acts solely as an adviser to one or more venture capital funds.
There is no general assets-under-management ceiling for this exemption. A venture capital adviser can manage considerably more than $150 million without becoming subject to SEC registration solely because of its size.
The funds themselves, however, must satisfy the SEC's definition of a venture capital fund. That definition places limits around the types of investments a fund may hold, the use of leverage, investor redemption rights and other characteristics of the fund.
The exemption is therefore not available simply because a manager invests in private companies. The manager's funds and activities have to remain within the conditions of the venture capital exemption.
A new fund, strategy or client that falls outside those conditions can change the adviser's registration status.
Private Fund Advisers Under $150 Million
The other principal route to ERA status is Section 203(m) and Rule 203(m)-1.
The exemption is available to an adviser that acts solely as an adviser to private funds and has less than $150 million in private fund assets under management in the United States.
A private fund adviser approaching the $150 million threshold needs to monitor when SEC registration may be triggered. An adviser well below $150 million can have a different problem if it takes on a client that is not a private fund.
Changes involving affiliated advisers can also affect the analysis. As the SEC has demonstrated in enforcement matters, it may look beyond the way affiliated entities are formally organized and consider how the advisory businesses actually operate.
For an ERA, continued eligibility for the exemption should therefore be part of the ongoing compliance process rather than something considered only when the firm is first formed.
What an ERA Still Has to Do
An ERA receives meaningful relief from requirements that apply specifically to advisers that are registered or required to be registered with the SEC. Rule 206(4)-7's mandatory compliance program, annual review and CCO requirements are among them.
An ERA must nevertheless make its required Form ADV filings and keep those filings current.
The antifraud provisions of the Advisers Act continue to apply. Rule 206(4)-8, for example, applies to advisers to pooled investment vehicles and prohibits materially false or misleading statements to investors and prospective investors, as well as other fraudulent conduct. Other provisions of Section 206 may also apply depending upon the conduct involved.
ERAs also remain subject to SEC examination authority.
An ERA still has to operate consistently with its fund documents, calculate fees and expenses correctly, identify and address conflicts, make accurate regulatory and investor disclosures, and remain within the conditions of the exemption on which it relies.
The federal exemption also does not necessarily resolve the adviser's obligations at the state level. Depending on where the adviser operates and conducts business, state registration or ERA reporting requirements may also apply.
SEC Enforcement Against ERAs
SEC enforcement over the past several years illustrates the range of issues that can arise for ERAs.
In 2022, the SEC charged Energy Innovation Capital Management, LLC, a California venture capital adviser operating as an ERA, with overcharging management fees to two venture capital funds. According to the SEC, the adviser made several errors in its favor when applying the management fee provisions of the funds' governing documents. EIC returned more than $678,000 plus interest and agreed to pay a $175,000 civil penalty.
The order found violations of Sections 206(2) and 206(4) and Rule 206(4)-8. In announcing the case, the SEC specifically noted that venture capital advisers may be exempt from registration while remaining subject to the Advisers Act's antifraud provisions.
In 2024, the SEC charged Anson Advisors, Inc., a Toronto-based ERA, together with affiliated registered adviser Anson Funds Management, over disclosures concerning their work with activist short publishers. The SEC found that offering materials omitted material information concerning the fund's short strategy and payments to short publishers. Anson Advisors agreed to a $1 million civil penalty.
Also in 2024, ACP Venture Capital Management Fund LLC was charged with failing to register as an investment adviser after the SEC concluded that ACPVC did not qualify for the Section 203(m) exemption on which it had been relying.
ACPVC had approximately $137 million in regulatory assets under management, below the $150 million threshold when viewed by itself. The SEC found, however, that ACPVC and an affiliated registered adviser were operationally integrated. When the businesses were considered together, the combined advisory operation did not qualify for the exemption.
In ACPVC, the issue was not simply whether reported AUM exceeded $150 million. The SEC looked at how the affiliated advisory businesses actually operated.
The SEC has also brought actions involving individual principals of ERAs.
In SEC v. Tomislav Vukota, Vukota Capital Management, LLC and VCM Global Asset Management Ltd., the SEC brought charges in 2025 against Vukota and two advisory entities he controlled, one of which had reported as an ERA. The SEC alleged breaches of fiduciary duty, undisclosed conflicts and materially misleading statements concerning assets under management, investment strategy, the existence of an auditor and the firm's ERA filing status.
In 2026, the SEC filed charges against Giovanni Pennetta, who managed a private fund through ERA Sestante Capital LLC. The SEC alleged false representations to investors and the misappropriation of investor assets and charged violations of multiple antifraud provisions of the federal securities laws.
The Pennetta allegations are well outside the normal compliance issues facing a legitimate private fund manager. The EIC, Anson and ACPVC matters involve issues much closer to the routine compliance concerns of an ERA: fee calculations, disclosure, conflicts, organizational structure and continued eligibility for the exemption.
How DFP Partners Can Help
DFP's approach is not to impose the compliance infrastructure of a registered investment adviser on an ERA. The compliance function should reflect the ERA's business, the exemption on which it relies, the risks presented by its activities and the way its principals have chosen to operate the firm.
That can take several forms. Where an ERA has designated a CCO, DFP can provide the same type of ongoing support we provide to CCOs at registered investment advisers. Where the firm wants to outsource the function, DFP can serve as the CCO. Where an ERA does not want or need a formal CCO, we can work directly with the managing member, general partner or other senior principal responsible for compliance.
Much of the underlying work is similar to the compliance support we provide to registered advisers, but focused on the rules and risks that apply to the ERA. That can include developing and maintaining appropriate policies and procedures, preparing and reviewing Form ADV filings, monitoring continued eligibility for the applicable exemption, reviewing new funds, strategies, clients and affiliated entities for potential registration implications, evaluating fees and expenses against governing documents, crafting disclosures for investor pitch books, reviewing conflicts and disclosures, addressing applicable state requirements, and assisting with SEC examinations or other regulatory inquiries.
The scope can also change as the ERA changes. A new fund, a different investment strategy, growth in assets, a new affiliate or a change in the types of clients the firm advises can alter the regulatory analysis. Part of DFP's role is to identify those issues while the firm is considering the business change, rather than after the change has already created a registration or compliance problem.
A manager approaching $150 million, for example, should be preparing for registration before the threshold is crossed. A venture capital adviser considering a new fund or strategy should understand in advance whether the activity remains within the venture capital exemption. An ERA considering a new affiliate or advisory relationship should understand whether the structure affects continued reliance on its exemption.
While an Exempt Reporting Adviser is not exempt from regulation, the objective is not to impose unnecessary RIA infrastructure on an exempt adviser. It is to make sure the adviser continues to qualify for the exemption it relies upon, complies with the requirements that do apply, and understands the regulatory consequences of changes to its business before those changes create a problem.