On August 23, 2023, the SEC announced that it had “adopted new rules and rule amendments to enhance the regulation of private fund advisers.” The new rules make sweeping changes to private fund advisers and the funds they manage and need to be carefully reviewed and taken seriously.
The new rules require private fund advisers that are registered with the SEC to:
- provide investors with quarterly statements detailing information regarding private fund performance, fees, and expenses;
- obtain an annual audit for each private fund; and
- obtain a fairness opinion or valuation opinion in connection with an adviser-led secondary transaction.
The rules also require that all private fund advisers – whether or not SEC-registered:
- prohibit engaging in certain activities and practices that are contrary to the public interest and the protection of investors unless they provide certain disclosures to investors, and in some cases, receive investor consent; and
- prohibit providing certain types of preferential treatment that have a material negative effect on other investors and prohibit other types of preferential treatment unless disclosed to current and prospective investors.
The new rules will also require all registered advisers, including advisers that do not advise private funds, to document in writing the annual review of their compliance policies and procedures.
Notably, some of the rules do not apply to do not apply to investment advisers with respect to securitized asset funds they advise.
The new rules take effect on various dates beginning 60 days to 18 months following publication in the Federal Register, depending upon the specific rule or, in some cases, the amount of private funds under management.
Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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