The Securities and Exchange Commission adopted new rules to increase the regulation of private fund advisers, Advisor Hub reports.
The commission said its action was aimed at protecting private fund investors by increasing transparency, competition, and efficiency in the market.
Under the rules, private fund advisers will be required to provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance. They will also have to distribute to investors an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion or valuation opinion.
“Private funds and their advisers play an important role in nearly every sector of the capital markets,” said SEC Chair Gary Gensler. “By enhancing advisers’ transparency and integrity, we will help promote greater competition and thereby efficiency. Consistent with our mission and Congressional mandate, we advance today’s rules on behalf of all investors — big or small, institutional or retail, sophisticated or not.”
The rules will also prohibit all private fund advisers from providing investors with preferential treatment regarding redemptions and information if such treatment would negatively impact other investors.
In addition, the final rules will restrict certain other private fund adviser activity that is contrary to the public interest and the protection of investors. Funds will also be barred from charging investors fees to cover regulatory investigations and compliance costs, unless investors agree to the costs. Funds will be prohibited from charging those fees and expenses if the regulatory actions result in a court- or government-ordered sanction.
Gensler said the SEC has authority to enact the measures under the 2010 Dodd-Frank Act which allows the commission to prohibit or restrict advisers’ sales practices, conflicts of interest and compensation.
The attorneys at Hyman Cotter PC include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. When it comes to regulatory compliance and enforcement matters, our attorneys have dealt with a wide range of investigations and enforcement actions. If your firm is facing an investigation from a regulatory agency, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
