When it comes to investment advisory firms, not every firm needs to go through the full SEC registration process. That’s where the Exempt Reporting Adviser (ERA) comes in—a classification designed for smaller, specialized fund managers who want to stay compliant without the heavy regulatory lift.
What is an Exempt Reporting Adviser?
An Exempt Reporting Adviser (ERA) is an investment adviser that manages only venture capital funds or private funds with less than $150 million in U.S. assets under management (AUM). While they’re exempt from full SEC registration, ERAs are not entirely off the radar—they still have to meet key regulatory obligations.
For early-stage venture firms, boutique fund managers, and specialized investment entities, ERA status offers a practical, low-friction way to operate within the rules while maintaining flexibility.
Regulatory Requirements for ERAs
- Although ERAs enjoy lighter oversight than fully Registered Investment Advisers (RIAs), they are still required to: Form ADV Part 1 Filing ERAs must file Form ADV Part 1 through the SEC’s IARD system, disclosing basic information about the firm, its operations, and ownership.
- Books and Records
ERAs are required to maintain accurate books and records, similar to fully registered advisers. - Anti-Fraud Compliance
Must adhere to the anti-fraud provisions under the Investment Advisers Act of 1940—this includes acting in clients’ best interests and avoiding misleading practices. - No Form ADV Part 2
Unlike Registered Investment Advisers (RIAs), ERAs are not required to file or deliver Form ADV Part 2 (the narrative brochure). - State-Level Requirements
ERAs may still be subject to state registration or notice filing depending on the jurisdiction(s) in which they operate. - No Routine SEC Exams
While not regularly examined by the SEC, ERAs can be investigated if there's suspicion of misconduct or non-compliance. - Compliance Policies (Recommended)
Although not mandated, it’s considered best practice for ERAs to maintain written policies and procedures to support good compliance hygiene.
ERA vs. RIA: Key Differences
To understand how ERAs fit within the broader regulatory landscape, it’s useful to consider how they differ from Registered Investment Advisers (RIAs), who operate under a more extensive compliance framework.
RIAs are fully registered with the SEC or state regulators and are permitted to advise a wide range of clients, including individuals, institutions, and funds. Their obligations are broader—covering detailed disclosures, formal compliance programs, and regular regulatory examinations.
Here's a quick side-by-side comparison to see how ERAs stack up against RIAs:
| Category | Exempt Reporting Adviser (ERA) | Registered Investment Adviser (RIA) |
|---|---|---|
| SEC Registration | Not required; files Form ADV Part 1 only | Required; files Form ADV Part 1 and Part 2 |
| Who They Advise | Only VC or private funds under $150M AUM | Any clients (individuals, funds, institutions) |
| Compliance Program | Not required (best practices encouraged) | Required – formal compliance program needed |
| Form ADV Part 2 | Not required | Required – must deliver to clients |
| Books & Records | Basic recordkeeping | Detailed records required |
| Chief Compliance Officer | Not required | Must appoint a CCO |
| SEC Exams | Not routinely examined | Routinely examined by SEC |
| Anti-Fraud Rules | Applies | Applies |
| State Requirements | May have state-level filings | Registered with SEC or states based on AUM |
| Regulatory Burden | Lighter – good for smaller firms | Heavier – for larger/more complex advisory businesses |
Summary
Exempt Reporting Adviser status is a smart option for smaller or niche investment managers who want to stay compliant without the cost and complexity of full SEC registration. It balances regulatory oversight with operational flexibility—making it ideal for firms managing private or venture capital funds at an early or moderate scale.
Whether you’re considering ERA status or simply trying to understand where your advisory firm fits, knowing the differences between ERAs and RIAs can help you make more informed, strategic decisions.