Many hedge fund managers that previously were not required to register
with the SEC as investment advisers will be required to register by July 21, 2011 – that is, in just under four months – unless the SEC extends the registration deadline. Rule 203-1 under the Investment Advisers Act of 1940 (Advisers Act) currently provides that to apply for registration with the SEC as an investment adviser, a hedge fund manager must complete Form ADV, file Part 1A of Form ADV and file the brochure(s) required by Part 2A of Form ADV electronically with the Investment Adviser Registration Depository (IARD). Last July, the SEC finalized amendments to Part 2 of Form ADV and related rules under the Advisers Act. Those amendments were long in the making – a decade, by some counts – and they have changed Part 2 significantly. Most notably, Part 2 is now entirely narrative, publicly filed and deeper and broader in terms of the categories of required disclosure (including disciplinary history). So, hedge fund managers will have to register as investment advisers and registered investment advisers must file Form ADV, Part 2. Therefore, registered hedge fund managers will have to file Form ADV, Part 2. For managers, this has been an expensive syllogism. Many have hired compliance consultants with the goal of saying no more and no less than is required in their Part 2s. Recently, the staff of the SEC’s Division of Investment Management (Division) offered assistance in this collective benchmarking effort by publishing “Staff Responses to Questions About Part 2 of Form ADV” (Staff Responses). The Staff Responses include a series of commonly asked questions and answers to those questions. But the questions are broad and the answers are terse, in some cases, limited to a single, oracular word. While better than no statement from the Division, the Staff Responses raise as many questions as they answer. In particular, the Staff Responses say nothing about the background and context of the answers; provide no guidance on the interaction among and application of the answers; and fail to highlight the extent to which certain answers render others largely moot. This article seeks to fill in the blanks left by the Staff Responses. It does so by discussing: the legal and regulatory authority supporting some of the more relevant answers; where those answers fit into the more general patchwork of hedge fund regulation; the interaction among the answers; and the application of the answers to offshore advisers to offshore hedge funds. The article also offers guidance on implementing certain answers and highlights what certain of the answers do not cover.