What criterion must a Private Fund Adviser meet to be exempt from SEC registration?

A Private Fund Adviser can be exempt from SEC registration by advising only private funds and having assets under management (AUM) not exceeding a certain threshold, which is $150 million. This exemption allows advisers to operate while avoiding the regulatory burden associated with SEC registration.

By limiting the AUM to $150 million, the regulation recognizes that smaller advisers may not pose the same level of systemic risk or investor protection concerns that larger firms do. This criterion enables smaller advisers to provide investment advice without undergoing the extensive regulatory scrutiny that larger firms face.

The other choices do not align with SEC criteria for exemption. For instance, simply having assets exceeding $200 million does not qualify for an exemption—in fact, it could prompt registration. Advising only non-profit organizations does not inherently provide a basis for exemption in the context of the SEC's regulatory framework. Lastly, having fewer than five clients does not by itself meet the exemption criteria, as advisers can still have more clients while remaining below the threshold of private fund AUM that necessitates registration.