In an open meeting of the Commission today, the SEC approved new rules to regulate private fund advisors. The SEC said that the new rules are designed to “protect private fund investors by increasing transparency, competition, and efficiency in the private funds market.”
SEC Chairman Gary Gensler issued the following comment on the new rules:
“Private funds and their advisers play an important role in nearly every sector of the capital markets. 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 new rules will require private fund advisers to provide investors with quarterly statements with certain information regarding fund fees, expenses, and performance. Additionally, there will be a new requirement that private fund advisers registered with the Commission obtain and 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. The new rules are said to prohibit all private fund advisers from providing investors with preferential treatment.
A fact sheet, available below, was provided with the new rules.
The Chairman of the House Financial Services Committee, Patrick McHenry, issued a statement on the private fund management rules.
“Once again, Chair Gensler’s SEC is exceeding its statutory authority to impose onerous and costly mandates—this time on private funds,” said Chairman McHenry. “By applying a framework designed for retail funds used by everyday investors to private funds, this rule fails to acknowledge the differences between these markets. Instead of pursuing this one-size-fits-all approach, the SEC should be working to strengthen our public markets and create new opportunities for all investors to save and build wealth through our private markets—just like Republicans have done with our capital formation agenda. I urge the SEC to rescind this ill-advised rule, which is a thinly veiled attempt to dictate private fund management.”