Private Funds: Proposals to enhance investor protections

The SEC proposed a two-part package of new rules and rule amendments under the Investment Advisers Act of 1940, that will require reforms in the private fund industry and amendments to the compliance rule under the Advisers Act for all registered advisers, including those that do not manage private funds. The proposed amendments are significant and have the ability to alter regulatory reporting, investor reporting, attestation, operations and fund structuring. Notably, the amendments would increase investors’ ability to monitor the performance of their fund investments, including compensation, fees, and expenses, and to more easily make comparisons between prospective investments.  All SEC registered advisers, and those required to be registered, must assess the operational impacts and associated controls from these potential changes. All financial services companies should expect increased regulatory focus in the private funds sector.