Hedge Fund '33 and '34 Act Exemptions

A hedge fund does not have to register and deliver a prospectus under the US Securities Act of 1933 ('33 Act) as long as the interests in the fund are not publically offered (known commonly as a "private placement"). The SEC has provided by rule a number of safe harbors from '33 Act registration - perhaps the most famous of which is known as "Reg D".

Perhaps the most used rule within Reg D is Rule 506 which allows an offering to be made without '33 Act registration, via private means, for up to an unlimited amount, to an unlimited number of "accredited investors" and up to 35 non-accredited investors. "Accredited investors" are essentially institutional and high net worth individual investors.  Modified prospectus delivery type requirements apply to non-accredited investors.

Under the US Exchange Act of 1934 ('34 Act) companies with $10M or more in assets and having 500 or more record equity securities owners or whose shares are exchange listed for trading are required to file reports on operations with the SEC. These are essentially the famous 10-K, 10-Q and 8-K reports.

Generally, hedge funds seek to avoid reporting by not listing and having fewer than 500 equity security owners of record.