The U.S. Securities and Exchange Commission (SEC) has proposed new rules that target advisers to private funds. Among other changes, the rules would require these advisers to obtain annual audited financial statements for each of the private funds they manage, as well as to provide investors with quarterly statements detailing fund performance, fees and expenses. Additionally, any adviser-led secondary transaction would require a fairness opinion from an independent third party. The proposed rules have been described as a “sea change” in the law.
Explaining the rules, SEC Chair Gary Gensler noted that many retirees depend on the pensions that are invested in these funds and that these funds “touch so much of our economy.” Critics say that the regulations are unnecessary, will not strengthen pension returns, and could stifle startup funds. Hester Peirce, the only commissioner to vote against the proposed rules, argued along different lines, saying that the proposed rules would represent “a meaningful recasting of the SEC’s mission” and that “our resources are better spent on retail investor protection.”
The public comment period for the proposed rules will be open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
More information regarding the SEC’s proposed rules is available in their press release, “SEC Proposes to Enhance Private Fund Investor Protection,” dated February 9, 2022.