What securities regulations govern PE/VC firms and what are the conventional exemptions available?

I'd like to know if PE/VC firms face any form of regulation whatsoever? For example, do they have have to comply with the Investment Act of <1940?> Do they require a NASD Broker/Dealer license? Must their principals register with the NASD in any capacity? And-- most importantly-- what are the conventional exemptions utilized to minimize regulatory and compliance oversight?

Per Bronzebeardans answer: "QIB"-- help?

Also, what about the fact that many buyout firms take fees for advice they render to portfolio companies upon sale- often in lieu of hiring an investment bank to perform that role. As I understand the SECrequirements, such activity is in a "grey area" and might trigger the need for a NASD broker/dealer license-- esp. if the deal is structured as other than an asset sale. And, in any asset sale there may be state laws governing real estate sales which could trigger requirements for a real estate agent/brokers license. These are amongst several little bumps which could cause problems for any firm engaged in rendering advice in a transaction involving the transfer of securities. Any thoughts?

I take from your answer that PE/VC firms can structure their activities fairly easily such that they do not have to meet any securities / investment advisory regs.-- thereby avoiding the irritation of regulation and compliance faced by investment banks.

In order to avoid compliance with the investment company act of 1940, PE funds tend to use an exemption that permits funds that have fewer than 100 accredited investor clients or only qualified purchasers (a sort of super accredited investor that typically only institutions can qualify for -- for a sense of it, a QIB is a per se qualified purchaser).

Since they don't do public offerings they are also exempt from the 1934 Act.

And because each fund is considered a client rather than each limited partner in a fund, they have fewer than 15 clients typically (less than 15 active funds) so they avoid registration under the Investment Advisers Act of 1940. Note however that if you now have an open ended fund that allows redemptions within 2 years of investment that I believe there are now more restrictive regulations that require you to register as an Investment Adviser

Most don't register with the NASD. They use intermediaries to trade.

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