The amendments have a substantial impact on private fund managers.

By Laura N. Ferrell, Aaron Gilbride, Michael Milazzo, Jamie Lynn Walter, Mike Hart-Slattery, and Haley Hohensee

On August 23, 2023, the Securities and Exchange Commission (SEC) adopted a final rule package (each a Rule, and together, the Rules) that modifies the regulation of private fund advisers under the US Investment Advisers Act of 1940, as amended (the Advisers Act).

Among other things, the Rules require that all SEC-registered private fund advisers:

  • prepare and distribute quarterly statements to investors containing detailed information on fees, expenses, compensation, and performance;
  • obtain and distribute to investors an annual audit for each private fund such advisers manage (using the same standards applied to annual private fund audits under Rule 206(4)-2 under the Advisers Act (the Custody Rule)); and
  • obtain and distribute to investors a fairness or valuation opinion from an independent opinion provider in connection with an adviser-led secondary transaction, as well as distribute to such investors a written summary of any key relationships with the independent opinion provider.

Additionally, the Rules (1) place restrictions on certain activities by all private fund advisers (including exempt reporting advisers) and (2) a requirement on all SEC-registered investment advisers.

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