Advisers must take a holistic approach when determining whether they are required to register with the SEC. And if they get that determination wrong, the SEC is likely to notice and take action. In a settled enforcement proceeding, the SEC claimed an investment adviser improperly relied on the private fund adviser exemption from registration under the Investment Advisers Act of 1940 because it had overlapping owners, managers, advisory personnel and operations with another adviser with which it shared office space. The nature and size of the operationally integrated enterprise rendered the adviser ineligible for the claimed exemption. Additionally, because the adviser should have registered, it was subject to Rule 206(4)‑2 under the Advisers Act – commonly known as the “Custody Rule” – but failed to comply with that Rule. This article discusses the basis for the enforcement proceeding, the alleged violations and the terms of the settlement. See our three-part series on steps an exempt reporting adviser must take to transition to SEC registered investment adviser status: “Registration Triggers and Building a Compliance Department” (Oct. 5, 2017); “Adopting Compliance Policies and Procedures” (Oct. 12, 2017); and “Regulatory Filings, Updates to Fund Documents and Preparation for SEC Examination” (Oct. 19, 2017).