Yesterday, the Securities and Exchange Commission (SEC) adopted a new set of regulations for Private Fund Advisers. The new rules will require private fund advisers to provide investors with more information and sets a higher bar on compliance.
Below, are several perspectives on the new rules – which were criticized by the Chair of the House Financial Services Committee.
Rory Callagy, an Associate Managing Director with Moody’s Investors Service, stated:
“The SEC’s final Private Fund Advisers Rules are much more palatable for alternative asset managers than the original proposal. Overall, the new reporting and compliance requirements will drive up the cost of doing business, while increased fee disclosures will shine a brighter light on managers’ fees. But the proposals that would have significantly increased managers’ liability risk were left out of the final rule set. Small-to-medium sized asset managers are expected to experience the biggest impact from the new rule requirements, potentially leading to further industry consolidation.”
Charlie Tafoya, CEO of Chronograph a private markets data monitoring and insights company, shared his opinion:
“Regardless of the decision taken by the SEC, it’s clear that there will be additional regulations coming to the private markets as they continue to represent a growing proportion of investors’ portfolios. Regulations will put further burden on finance professionals to produce more timely information and provide additional regulatory disclosures.
Already, institutional limited partners continue to demand higher quality and more granular information, and fund and asset managers are at times struggling to meet these demands. Adding additional compliance burdens will force many funds and managers to reevaluate their operating models, technology, and business organization. This regulation makes it more critical for fund managers to have the right technology throughout the investment lifecycle.”
SEC Commissioner Mark Uyeda voted against the rule, stating, “The Commission is on a precarious path that will inhibit capital formation and innovation, and will interfere with sophisticated investors’ abilities to invest in private funds.”
“Today, the Commission no longer is content to regulate private fund advisers to the same extent as other investment advisers. Instead, private fund advisers will be subject to six additional requirements with respect to the private funds they manage,” said Uyeda. He described the final rules as “arbitrary and capricious.”
You may read more on the new rules here.