SEC Changes to the Private Fund Adviser Rules
Aumni invites you to watch our most recent webinar, presented in collaboration with Aumni's Director of LP Solutions Shauna France. Shauna leads the conversation with co-presenters Chris Hayes, President of RedLine Policy Strategies, and Jason Mulvihill, Founder and President of Capitol Asset Strategies.
On the heels of the release of new SEC regulation, our panel shares their perspectives on the legal implications of the new rules and offer insights to help you navigate the most crucial first steps in your compliance strategy.
Topics covered include:
· Quarterly Statement Rule: Registered private fund advisers will have to provide quarterly fee, expense, and performance reporting to all investors in their US-domiciled funds.
· Private Fund Audit Rule: Registered private fund advisers will be required to obtain an annual audit of the financial statements of their funds.
· Adviser-Led Secondaries Rule: Registered private fund advisers will be required to obtain a fairness or valuation opinion from an independent provider, along with providing a summary of material business relationships involved in the transaction, when engaging in a sponsor-led secondaries transaction.
· Restricted Activities Rule: Sponsors, including exempt reporting advisers reliant on the venture exemption, will be restricted from engaging in certain activities, including certain conflicts of interest and compensation schemes, without significant disclosure or, in some cases, investor consent. This will include restrictions on directly or indirectly charging or allocating fees and expenses related to a portfolio investment or potential portfolio investment on a non-pro-rata basis without sufficient disclosure. Also, an adviser will be restricted from reducing the amount of any sponsor clawback by actual, potential, or hypothetical taxes applicable to the adviser, without robust investor disclosure.
· Preferential Treatment Rule: The negotiation dynamic between GPs and LPs will be significantly impacted by new requirements that limit the ability to provide preferential rights, with certain caveats, to certain LPs. LPs cannot be given preferential redemption rights or portfolio holdings information without it either being provided to all LPs, or subject to being required under the governmental legal obligations of that particular LP. Finally, prospective LPs to a fund will now have to disclose all material economic benefits provided to specific LPs in the fund, while current LPs in a fund have to have transparency into all preferential treatment provided to other LPs in the same or similar pool of assets.
· Legacy Status: In regard to certain new elements of the final rule, the SEC has provided grandfathering of existing rights and obligations in the fund agreement, to avoid having to amend fund documents.
Director, Venture Solutions
RedLine Policy Strategies
Founder & President
Capitol Asset Strategies