An Exempt Reporting Adviser (ERA) is a financial advisor who manages private funds and is exempt from registering with the U.S. Securities and Exchange Commission (SEC) or state regulators:
Eligibility
ERAs must only have private funds as clients. If an advisor has even one client that would require registration, they are no longer eligible for the ERA exemption.
Exemptions
ERAs can claim ERA status by using the Venture Capital Fund Adviser Exemption or the Private Fund Adviser Exemption. The Venture Capital Fund Adviser Exemption is for fund managers who only advise venture capital funds. The Private Fund Adviser Exemption is for advisers who only manage private funds and have less than $150 million in assets under management.
Requirements
ERAs must still pay fees and report public information via the IARD/FINRA system. They must also send initial privacy notices to investors along with standard fund documents. ERAs must send investors annual privacy disclosures unless they meet certain criteria.
Benefits
ERAs have fewer administrative and compliance requirements than other investment advisors. Depending on the state, they may not be required to have their funds audited.