Several states have exemption frameworks that do not align neatly with the federal ERA structure. The three most commonly cited problem states are Delaware, Washington, and California.
Delaware offers an investment adviser exemption, but it excludes advisers to 3(c)(1) funds. Since 3(c)(1) is the standard fund structure for most emerging managers (limited to 100 investors, no qualified purchaser requirement), many Delaware-based ERAs discover they need full state registration despite being exempt at the federal level.
Washington has a similar gap. Its state exemption for private fund advisers also excludes 3(c)(1) funds, creating the same registration requirement for managers who use that structure.
California operates its own regulatory framework with specific requirements that depend on your fund type. VC fund advisers may qualify for a state exemption, but non-VC fund managers (PE, hedge, opportunistic) face additional requirements and may need to register with the California Department of Financial Protection and Innovation.
If you have a place of business in any of these states, confirm your state-level obligations before assuming your federal ERA status is sufficient. The requirements change periodically, so check the current rules rather than relying on guidance from a prior year.
See State Investment Adviser Registration for Private Fund Managers.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation. Capital Company is not a law firm and does not provide legal advice.