5 things you can do now to prepare for the new SEC regulations

When the SEC voted on August 23rd this year to adopt and finalize new rules and amendments under the Investment Advisers Act of 1940 (the “Advisers Act”), the full implications for private fund managers crystalized. With these wide-ranging measures starting to come into effect any day now, the timeline to comply means you cannot afford to be complacent.

man in boardroom staring out of window

Here are some key areas of the Final Rules that each private fund advisor will be responsible for, regardless of whether they are registered with the SEC or not:

  • Quarterly Statement Rule 211(h)(1)-2
  • Audit Rule 206(4)-10
  • Compliance Rule 206(4)-7(b)
  • Adviser-Led Secondaries Rule 211(h)(2)-1
  • Preferential Treatment Rule 211(h)(2)-2
  • Restricted Activities Rule 211(h)(2)-3 

With these rules in mind, here are five key things private fund advisors should be considering and preparing for now:

  1. Become familiar with the required updates needed for private fund quarterly and annual audit reporting including required issuance dates, governing documents, policies, and procedures.
  2. Consider any grandfathering clauses that may affect your requirements under the Restricted Activities Rule and Preferential Treatment Rule with respect to already existing agreements.
  3. Start to work through how to incorporate additional transparency around private fund fees and expenses, including calculations and cross-reference to organizational documents, performance, and potential conflicts of interest.
  4. Review preferential treatments currently in place for certain investors in a private fund or a similar pool of assets and become familiar with the disclosure requirements, or cessation, of the same, for current and prospective investors.
  5. Assess the adoption dates for the new rules.

No one-size-fits-all approach

The nature and complexity of these reforms mean that firms need to take a proactive and individual approach to their compliance – there is no cookie-cutter solution.

With that in mind, here at Alter Domus, we are cognizant of the amount time and collaboration our clients will require across their own organization and across third party service providers, like ourselves.

The new requirements will have significant impacts on the timing and level of detail and disclosures required for quarterly and annual financial reporting, and as such, please get in touch with us to discuss our plans for preparation. Contact us below.

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