Quarterly Statement Rule
SEC-registered advisers will now provide quarterly reporting of fees, expenses, and performances to investors.
Audit Rule
SEC-registered advisers will be required to have the private funds they manage go through an annual audit.
Adviser-led Secondaries Rule
SEC-registered advisers who/that facilitate a secondary transaction of the sale of securities and who/that sit on both sides of the transaction must prepare and distribute a written summary of any material business relationships between the adviser or its related persons and the independent opinion provider.
Restricted Activities Rule
All private fund advisers will be restricted from:
– Charging fees or expenses associated with an investigation of the adviser or related person by a governmental or regulatory authority without disclosure and consent of the majority of investors.
– Charging fees or expenses associated with an investigation of the adviser or related person that results in the imposition of a sanction by a governmental or regulatory authority.
– Charging fees or expenses associated with the examination of the adviser or related person.
– Reducing the amount of an adviser clawback by actual, potential, or hypothetical taxes applicable to the adviser, its related persons, or beneficial owners.
– Charging or allocating fees related to a portfolio investment on a non pro-rata basis when multiple private funds have invested in the same portfolio investments.
– Borrowing money, securities, or other private funds assets, or receiving a loan or an extension of credit from a private fund client.
Preferential Treatment Rule
All private fund advisers will be restricted from providing preferential treatment with to certain investors if there is a reasonable expectation that such preference will negatively and materially effect other investors. Further, any preferential treatment requires disclosure to all investors. In other words, side letter agreements that provide specific preferences to investors must be disclosed and potentially offered to all other investors.
Annual Review Rule
SEC-registered advisers are now required to document annual review in writing.
Recordkeeping Rule
SEC-registered advisers are now required to retain books and records related to the quarterly statement rule, the audit rule, the adviser-led secondaries rule, the preferential treatment rule, and the restricted activities rule.
The final rules to be in effect in accordance to the table below:
(1) A private fund adviser is any adviser of a Private Fund as the term is defined in the Investment Advisers Act (“IAA”) Section 202(a)(29) which includes funds that have claimed and exemption from registration as an investment company under Sections 3(c)(1) or (7) of the Investment Company Act (“ICA”).
– Asher Ang
Attorney
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