Opportunity Zone Magazine Volume 1, Issue 3 | Page 83
THE SECURITIES LAWS LANDSCAPE FOR OZ FUNDS AND THEIR MANAGERS
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the possibility of being deemed an investment adviser before
she is ready, the manager should analyze (with qualified legal
counsel) the QOF’s proposed business and investment plans.
A QOF may be able to organize its lower-tier investments in
Advisors with RAUM
exceeding $110 million
must register with the SEC
regardless of any stateregistration.
The OZ Incentive engenders a lot of enthusiasm, both from
potential investors and from entrepreneurial and experienced
sponsors. But there is more to it than business plans,
opportunity zone property tests, operating agreements, and
tax compliance. A host of entrants into the QOF space who
may never have had reason to think about the Company Act
or Advisers Act before should get up to speed quickly. With
a little planning and preparation with competent advisors,
both new and experienced fund managers can ensure they and
their QOFs meet all their respective securities compliance
obligations. Plan, develop a compliance strategy, do good, and
do well.
a way to reduce the risk that those investments are deemed
a security in the hands of the QOF. QOF managers should
also consider whether it makes sense to increase the threshold
of eligible QOF investors above the “accredited investor”
threshold and into the “qualified client” territory to diminish
certain potential limitations on the performance compensation
that the QOF manager may otherwise intend to receive.
Christopher Rogers and the Opportunity Zone group at
Jennings Strouss have organized more than a dozen Opportunity
Zone funds. Rogers’ broad practice focuses on corporate,
securities, fund formation, mergers and acquisitions, and other
business transactions. His clients include developers, founders
and entrepreneurs, growing and mature companies, private
investment funds, and investment advisers. Rogers also serves
in leadership positions in the State Bar of Arizona, serving as a
chair-elect of the securities regulation section and co-vice chair
of the business law section. He practices in Arizona, New Jersey
and New York.
Sources:
1 Authors Note: The securities laws are vast and technical. Their application is often nuanced
and fact-intensive and. This article is not intended to, and cannot in the space provided,
describe the laws, or even any of the issues touched on here, in any detail. This article
is not, and should not be deemed legal advice. Every QOF sponsor or manager should
meaningfully consult with securities counsel experienced with the laws described here.
2 See, e.g., S.E.C. v. W.J. Howey Co. et. al., 328 U.S. 293 (1946); see also United Housing
Federation v. Forman, 421 U.S. 837 (1975).
3 Advisers Act of 1940, §202(a)(11); 15 U.S.C. §80b-2(a)(11).
4 Advisers Act Rel. No. 1092 (1987).
5 See Form ADV Part 1: Instructions for Part 1A, instr. 5.F, Calculating Your RAUM.
6 17 CFR §275.204-4.
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