The SEC announced settled charges against private fund manager, ACP Venture Capital Management Fund LLC, an exempt reporting adviser, for failure to register as an investment adviser. The firm took the position that it relied on the Rule 203(m)-1 private fund adviser exemption for advisers that manage only private funds with less than $150 million in assets under management. However, the SEC found that the firm did not qualify for this exemption because there was operational and ownership overlap with an affiliate that is registered with the Commission as an investment adviser. The firm had custody of the assets of the Funds at issue because it served as the investment manager of each of the private funds and a related person served as the manager of each of the funds, but did not obtain annual audits or surprise examinations to verify its custody of these securities. Accordingly, given that the SEC concluded that the firm was required to be registered as an investment adviser, it further charged the firm with violations of the Custody Rule.