# Investment Advisers Act of 1940 — Adviser Registration

## Palace Fund Status — Not Applicable

**Palace Fund LLC is excluded from this Act entirely.** As a family office under SEC Rule 202(a)(11)(G)-1, Palace Fund is not an "investment adviser" as defined by the Act. No registration, no filing, no ongoing obligations. See `management/research/fund/us/form-adv-family-office-exclusion.md` and `management/legal/usa/form-adv.md` for full analysis.

**"Fund manager" vs. "investment adviser":**
- Junwon is the **fund manager** (Managing Member of Palace Fund LLC). This is a plain-English descriptor of his role. There is no legal restriction on using this term.
- "Investment adviser" is a regulated term of art under the Act. Palace Fund must not hold itself out as an investment adviser publicly — this is condition 3 of the family office exclusion. Violating it would cost the exclusion.
- Junwon can say: "I manage Palace Fund LLC, a private family investment fund."
- Junwon cannot say: "I am an investment adviser" or "I provide investment advisory services."

The sections below document the Act's framework for reference — applicable to funds that do NOT qualify for the family office exclusion.

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## What It Is

The Investment Advisers Act of 1940 requires anyone who provides investment advice for compensation to register with the SEC as an investment adviser — unless an exemption applies. The managing member of a private fund is generally considered an investment adviser to the fund.

## Exempt Reporting Adviser (ERA)

Most small private fund managers qualify for the **private fund adviser exemption** under Section 203(m). This means you do not register but you DO file as an "exempt reporting adviser" on Form ADV.

**Requirements to qualify:**
- Advise only private funds (funds relying on 3(c)(1) or 3(c)(7))
- Total US regulatory assets under management (RAUM) under $150 million
- No requirement to have US clients specifically — this is about US RAUM

**What an ERA must do:**
- File Form ADV Parts 1A and 2A (brochure) with the SEC via IARD
- Pay IARD filing fees
- Report basic information about the fund(s) managed
- Remain subject to SEC antifraud provisions and SEC examination authority
- File annual amendments within 90 days of fiscal year end

**What an ERA does NOT have to do:**
- Implement a full written compliance program (though strongly recommended)
- Appoint a chief compliance officer (though recommended)
- Follow the Custody Rule (though practical custody compliance is still important)
- Follow the full books and records requirements of registered advisers

## Registered Investment Adviser (RIA)

If you exceed $150 million RAUM or advise non-fund clients (like separate accounts), you must register as an RIA.

**Key obligations of a registered adviser:**
- Written compliance policies and procedures (Rule 206(4)-7)
- Designated chief compliance officer
- Annual compliance review
- Custody Rule compliance (Rule 206(4)-2): qualified custodian, annual surprise examination or audited financials
- Books and records requirements (Rule 204-2)
- Form ADV delivery to clients (investors)
- Code of ethics
- Pay-to-play restrictions (Rule 206(4)-5)

## State vs. SEC Registration

- Advisers with less than $100 million AUM generally register with the state, not the SEC.
- **Exception**: Advisers to private funds may register with the SEC (or file as ERA) regardless of AUM size if they would otherwise have to register in 15+ states.
- California registration is through the DFPI. California-only advisers with less than $100M AUM who do not qualify for SEC registration must register with the state.

## Korean Investor Considerations (General Reference)

- Foreign clients count toward RAUM for non-family-office funds.
- **For Palace Fund**: Korean investors (Sungho Park) are family clients. RAUM and ERA status are irrelevant.
- If asked about registration status: "Palace Fund is a private family investment fund and is not required to register as an investment adviser."

## Action Items for Palace Fund

**None required under this Act.** The family office exclusion removes Palace Fund from the Act's jurisdiction.

If the family office exclusion is ever lost (outside investors admitted, public solicitation), the fallback is ERA status under § 203(m). At that point:
1. File truncated Form ADV Part 1A via IARD
2. Calculate RAUM — must be under $150 million to qualify as ERA
3. File annual amendments within 90 days of fiscal year end
4. Implement basic compliance practices (personal trading, conflicts, valuation)