SEC Implements Sweeping Changes for Private Fund Advisers: A Deep Dive into the New Rules

On August 23, 2023, the U.S. Securities and Exchange Commission (SEC) ushered in a new era for private fund advisers with the adoption of groundbreaking rules under the Investment Advisers Act of 1940. These rules, outlined in the Adopting Release, impose significant obligations on registered private fund advisers, aiming to enhance transparency, protect investors, and mitigate potential risks in the private fund industry.

The SEC's final rules signal a substantial increase in regulatory requirements for private fund advisers, regardless of their registration status. While the reforms aim to protect both direct and indirect private fund investors, they come at a time when CCOs and compliance professionals are grappling with regulatory fatigue amid numerous proposals on the SEC's agenda.

Initially proposed in February 2022, the private fund rules faced considerable resistance from the industry. Concerns about clarity, unintended consequences, and the potential impact on smaller funds, including minority and women-run funds, were voiced by various stakeholders. Despite industry pushback, the SEC adopted the final rules on August 23, 2023, albeit with modifications in response to the concerns raised during the comment period.

As the industry adapts to these changes, careful consideration of the nuances within each rule will be crucial for private fund advisers to ensure continued compliance and successful operations in this evolving regulatory environment.

This information comes from Amber Allen, General Counsel and EVP of Fairview and President of Fairview Cyber, and Genna Garver, Partner at Troutman Pepper whose article The SEC’s Private Fund Rules: What Advisers Need to Know appeared in the October 2023 edition of NSCP Currents. To receive important information such as this and to review the risks and the associated compliance and supervision suggestions, join NSCP today to receive NSCP Currents and stay up to date on issues that matter most for the financial services industry. Members can access the full article here. 

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