Why Exempt Reporting Advisers (ERAs) Compliance Matters for Emerging Managers

Understanding compliance as an Exempt Reporting Adviser (ERA) under the Investment Advisers Act of 1940 is critical to building trust with investors and maintaining regulatory integrity. While ERAs are not required to register with the Securities and Exchange Commission (SEC), they are still subject to specific reporting and compliance obligations.

For startups and emerging managers, establishing strong compliance practices early helps reduce regulatory risk, supports operational efficiency, and strengthens credibility with current and prospective investors.

While not exhaustive, the guidance below outlines essential tips, best practices, common pitfalls to avoid, and a practical compliance calendar to help ERAs meet their obligations effectively.

Important things to know about Exempt Reporting Advisers (ERA) Compliance:

1. Compliance Tips for Exempt Reporting Advisers (ERAs)
2. Common ERA Compliance Pitfalls to Avoid
3. Compliance Calendar for ERAs (Non-Comprehensive)
4. Ongoing Responsibilities for Exempt Reporting Advisers (ERAs)

Compliance Tips for Exempt Reporting Advisers (ERAs)

Navigating compliance as an Exempt Reporting Adviser requires diligence, organization, and a proactive approach to regulatory requirements. The following best practices can help ERAs maintain compliance and protect their reputation.

1. Understand reporting obligations

ERAs must file an annual amendment to Form ADV within 90 days of the end of their fiscal year. Form ADV must also be updated promptly when material changes occur outside the annual reporting cycle.

2. Ensure accuracy and completeness of records

Maintain organized, up-to-date books and records, including communications, fund performance data, and marketing materials. Be prepared for periodic regulatory inquiries or investor diligence requests. Mock audits can be a useful tool to assess readiness.

3. Adopt and maintain a robust code of ethics

Although ERAs are not registered advisers, a documented code of ethics promotes consistency, addresses common due diligence questions, and reinforces investor confidence.

4. Monitor advertising and solicitation practices

Ensure marketing materials and performance disclosures are accurate, complete, and compliant. Inaccurate or misleading information can expose ERAs to regulatory and reputational risk.

5. Stay up-to-date on state requirements

State-level obligations vary and may include additional filings or registrations. Regular review of state requirements is essential to avoid unintended noncompliance.

6. Implement strong cybersecurity protocols

Protect sensitive investor and financial information through documented cybersecurity policies. Regularly review and update controls to address evolving risks.

7. Monitor exemption eligibility

Periodically confirm continued eligibility for applicable exemptions, such as the venture capital adviser exemption, to avoid inadvertently triggering registration requirements.

8. Proactively address conflicts of interest

Clearly and comprehensively disclose any potential conflicts of interest. Implement, maintain, and pIdentify, disclose, and manage potential conflicts of interest through clear policies covering areas such as fee arrangements and co-investments.

By following these practices, ERAs can meet regulatory obligations while building trust with investors and stakeholders.

Common ERA Compliance Pitfalls to Avoid

1. Failing to Update Form ADV Timely: Late filings or failure to report material changes can lead to penalties or loss of exemption.
2. Inadequate Documentation: Disorganized or incomplete records and data may result in issues and findings during examinations.
3. Ignoring State-Level Requirements: Overlooking local compliance responsibilities can expose the ERA to fines or sanctions by agencies other than the SEC.
4. Non-Compliant Marketing: Misleading items and misstatements in performance data or other advertising materials can harm reputation and create liability.
5. Disregarding Cybersecurity Risks: Lack of focus on data protection can lead to breaches, reputational damage, litigation and enforcement actions

Compliance Calendar for ERAs (Non-Comprehensive)

Date	Compliance Item	Description
January 15	Confirm Annual Fund Audits	Confirm audit engagement letters and timing to ensure fund audits are completed and delivered to investors within contractual or regulatory deadlines
March 31	Annual Form ADV Update (90 days post-Fiscal Year-End for Dec 31 FYEs)	File the annual amendment to Form ADV Part 1A and 1B, as applicable
April 30 (approx.)	State Blue Sky Filings for Fund Interests	Confirm compliance with applicable state-level notice filings and renewals, which vary by jurisdiction
June 30	Mid-Year Review of Compliance Policies	Review and update compliance policies to reflect regulatory developments or operational changes
October 15	Prepare for Year-End Filings	Review investor disclosures, compliance documentation, and fund performance records in preparation for year-end reporting
December 31	Confirm ERA Exemption Status	Confirm ongoing eligibility for the venture capital adviser exemption and other applicable ERA exemptions

Ongoing Responsibilities for Exempt Reporting Advisers (ERAs)

To maintain compliance and foster investor trust, Exempt Reporting Advisers (ERAs) should focus on consistent and thorough management of their ongoing responsibilities. Below are key tasks to address on a recurring and as-needed basis:

1. Monthly/Quarterly Responsibilities:
   • Regularly monitor fund performance reporting to ensure transparency and alignment with investor expectations.
   • Conduct thorough reviews of key service providers, such as fund administrators and auditors, to assess their performance and reliability.
   • Reconcile financial records to maintain accuracy and avoid discrepancies.
   • Keep investor contact information current to support effective communication and reporting.
2. Ad Hoc Responsibilities:
   • Promptly file updates to Form ADV following any material changes, such as shifts in ownership, location, or operations, to maintain regulatory compliance.

By addressing these responsibilities on both a routine and ad hoc basis, ERAs can ensure efficient operations, maintain investor confidence, and stay aligned with regulatory requirements. A proactive approach to these tasks supports long-term success and readiness for any compliance challenges.

Final Thoughts on ERA Compliance for Emerging Managers

ERA compliance is not just a regulatory requirement. It is a signal to investors that your firm operates with discipline, transparency, and integrity.

By following these best practices and maintaining a structured compliance approach, emerging managers can reduce risk, improve operational efficiency, and position their firm for sustainable growth.

Kranz Consulting works alongside ERAs and their legal and compliance teams as a trusted advisor, helping firms navigate compliance requirements with clarity and confidence.