On July 15, 2010, the Senate passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Bill”), which includes The Private Fund Investment Advisers Registration Act of 2010 (the “Act”). The President is expected to sign the Dodd-Frank Bill next week. Effective immediately upon the enactment of the Dodd-Frank Bill, the accredited investor net worth standard for natural persons will be amended to exclude the value of the person’s primary residence.

Currently, a natural person can satisfy the accredited investor standard if the person is an individual who: (i) had an income in excess of $200,000 in each of the two most recent years (or joint income with his or her spouse in excess of $300,000 in each of those years) and has a reasonable expectation of reaching the same income level in the coming year (the “Income Test”) or (ii) has a net worth (or joint net worth with his or her spouse) in excess of $1,000,000 (the “Net Worth Test”). The Dodd-Frank Bill does not change the requirements of the Income Test, but does adjust the Net Worth Test to exclude the value of the natural person’s primary residence. A natural person who makes a new investment or additional contribution to a private fund after the enactment of the Dodd-Frank Bill must satisfy the revised Net Worth Test. There will be no effect on an existing investor who does not make additional contributions after the enactment of the Dodd-Frank Bill.

The adjustment of the accredited investor standard is applicable to all private placements made under Regulation D of the Securities Act of 1933.

The Act also directs the SEC to review and adjust (if appropriate) the accredited investor standard at least once every four years. However, the first adjustment (if any) will occur no earlier than four years after the enactment of the Dodd-Frank Bill.

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Since the adjustment of the Net Worth Test is effective as of the enactment of the Dodd-Frank Bill, it is recommended that private fund managers revise or supplement the subscription agreements for their private funds to reflect this adjustment. If you have any questions with respect to the foregoing, please contact your primary attorney in the Investment Management Group at Seward & Kissel LLP.