Opportunity Zone Magazine Volume 1, Issue 3 - Page 83

THE SECURITIES LAWS LANDSCAPE FOR OZ FUNDS AND THEIR MANAGERS 83 the possibility of being deemed an investment adviser before she is ready, the manager should analyze (with qualified legal counsel) the QOF’s proposed business and investment plans. A QOF may be able to organize its lower-tier investments in Advisors with RAUM exceeding $110 million must register with the SEC regardless of any stateregistration. The OZ Incentive engenders a lot of enthusiasm, both from potential investors and from entrepreneurial and experienced sponsors. But there is more to it than business plans, opportunity zone property tests, operating agreements, and tax compliance. A host of entrants into the QOF space who may never have had reason to think about the Company Act or Advisers Act before should get up to speed quickly. With a little planning and preparation with competent advisors, both new and experienced fund managers can ensure they and their QOFs meet all their respective securities compliance obligations. Plan, develop a compliance strategy, do good, and do well. a way to reduce the risk that those investments are deemed a security in the hands of the QOF. QOF managers should also consider whether it makes sense to increase the threshold of eligible QOF investors above the “accredited investor” threshold and into the “qualified client” territory to diminish certain potential limitations on the performance compensation that the QOF manager may otherwise intend to receive. Christopher Rogers and the Opportunity Zone group at Jennings Strouss have organized more than a dozen Opportunity Zone funds. Rogers’ broad practice focuses on corporate, securities, fund formation, mergers and acquisitions, and other business transactions. His clients include developers, founders and entrepreneurs, growing and mature companies, private investment funds, and investment advisers. Rogers also serves in leadership positions in the State Bar of Arizona, serving as a chair-elect of the securities regulation section and co-vice chair of the business law section. He practices in Arizona, New Jersey and New York. Sources: 1 Authors Note: The securities laws are vast and technical. Their application is often nuanced and fact-intensive and. This article is not intended to, and cannot in the space provided, describe the laws, or even any of the issues touched on here, in any detail. This article is not, and should not be deemed legal advice. Every QOF sponsor or manager should meaningfully consult with securities counsel experienced with the laws described here. 2 See, e.g., S.E.C. v. W.J. Howey Co. et. al., 328 U.S. 293 (1946); see also United Housing Federation v. Forman, 421 U.S. 837 (1975). 3 Advisers Act of 1940, §202(a)(11); 15 U.S.C. §80b-2(a)(11). 4 Advisers Act Rel. No. 1092 (1987). 5 See Form ADV Part 1: Instructions for Part 1A, instr. 5.F, Calculating Your RAUM. 6 17 CFR §275.204-4. OPPORTUNITYZONE.COM