The Securities and Exchange Commission announced it has voted to propose new rules intended to protect private fund investors and tighten the regulation of private fund advisers.
In an effort to improve transparency, one proposal would require registered private fund advisers to provide investors with quarterly investment statements regarding their fund fees and returns.
The advisers would also be prohibited from providing certain types of preferential treatment to investors in their funds and all other preferential treatment unless it is disclosed to current and prospective investors.
All registered advisers would also be required to document the annual review of their compliance policies and procedures in writing.
The new rules, which would amend sections of the Investment Advisers Act of 1940, are intended to strengthen protection of investors in the $18 trillion field of private funds.
“Private fund advisers, through the funds they manage, touch so much of our economy. Thus, it’s worth asking whether we can promote more efficiency, competition, and transparency in this field,” said SEC Chair Gary Gensler. “I support this proposal because, if adopted, it would help investors in private funds on the one hand, and companies raising capital from these funds on the other.”
Other changes proposed by the commission include requiring an annual audit of private funds, provided to the funds’ investors, and requiring private fund advisers to obtain a “fairness opinion” from an independent provider in connection with a specific kind of transaction where the adviser may stand to profit at the expense of private fund investors.
Private fund advisers would also be prohibited from engaging in a number of activities that are considered contrary to the public interest and the protection of investors.
The proposals are open for a public comment period after publication on the SEC’s website and in the Federal Register.
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