Hedge Fund Associations & Trade Industry Groups File Lawsuit Against United States SEC for Mandating Fee Disclosures Including Disallowing Better Liquidity Terms to Preferred Investors
1st September 2023 | Hong Kong
Hedge fund associations & trade industry groups have filed a lawsuit against United States SEC (Securities & Exchange Commission) for mandating fee disclosures including disallowing better liquidity terms to preferred investors. The hedge funds groups include The American Investment Council, the Managed Funds Association, Alternative Investment Management Association (AIMA), National Association of Private Fund Managers (NAPFM). Earlier in August 2023, the United States Securities & Exchange Commission (SEC) amended the private fund advisors regulations, including requiring private fund advisors to provide quarterly statements to investors (including performance & fees), providing yearly audited financial statement for each fund, and prohibiting providing preferred redemption & information to selected investors. More info below.
“ Hedge Fund Associations & Trade Industry Groups File Lawsuit Against United States SEC for Mandating Fee Disclosures Including Disallowing Better Liquidity Terms to Preferred Investors “
United States SEC Amends Private Fund Advisors Regulations: Provide Quarterly Statements to Investors Including Performance & Fees, Yearly Audited Financial Statement & Prohibit Providing Preferred Redemption & Information to Selected Investors
24th August 2023 – The United States Securities & Exchange Commission (SEC) has amended the private fund advisors regulations, including requiring private fund advisors to provide quarterly statements to investors (including performance & fees), providing yearly audited financial statement for each fund, and prohibiting providing preferred redemption & information to selected investors. United States SEC: “To enhance transparency, the final rules will require private fund advisers registered with the Commission to provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance. In addition, the final rules will require a private fund adviser registered with the Commission to obtain and distribute to investors an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion or valuation opinion. To better protect investors, the final rules will prohibit all private fund advisers from providing investors with preferential treatment regarding redemptions and information if such treatment would have a material, negative effect on other investors. In all other cases of preferential treatment, the Commission adopted a disclosure-based exception to the proposed prohibition, including a requirement to provide certain specified disclosure regarding preferential terms to all current and prospective investors. In addition, the final rules will restrict certain other private fund adviser activity that is contrary to the public interest and the protection of investors. Advisers generally will not be prohibited from engaging in certain restricted activities, so long as they provide appropriate specified disclosure and, in some cases, obtain investor consent. The final rules, however, will not permit an adviser to charge or allocate to the private fund certain investigation costs where there is a sanction for a violation of the Investment Advisers Act of 1940 or its rules.”
United States SEC Chair Gary Gensler: “Private funds and their advisers play an important role in nearly every sector of the capital markets. By enhancing advisers’ transparency and integrity, we will help promote greater competition and thereby efficiency. Consistent with our mission and Congressional mandate, we advance today’s rules on behalf of all investors — big or small, institutional or retail, sophisticated or not.”
United States SEC Amends Private Fund Advisors Regulations
23rd August 2023 – The Securities and Exchange Commission today adopted new rules and rule amendments to enhance the regulation of private fund advisers and update the existing compliance rule that applies to all investment advisers. The new rules and amendments are designed to protect private fund investors by increasing transparency, competition, and efficiency in the private funds market.
To enhance transparency, the final rules will require private fund advisers registered with the Commission to provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance. In addition, the final rules will require a private fund adviser registered with the Commission to obtain and distribute to investors an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion or valuation opinion.
To better protect investors, the final rules will prohibit all private fund advisers from providing investors with preferential treatment regarding redemptions and information if such treatment would have a material, negative effect on other investors. In all other cases of preferential treatment, the Commission adopted a disclosure-based exception to the proposed prohibition, including a requirement to provide certain specified disclosure regarding preferential terms to all current and prospective investors.
In addition, the final rules will restrict certain other private fund adviser activity that is contrary to the public interest and the protection of investors. Advisers generally will not be prohibited from engaging in certain restricted activities, so long as they provide appropriate specified disclosure and, in some cases, obtain investor consent. The final rules, however, will not permit an adviser to charge or allocate to the private fund certain investigation costs where there is a sanction for a violation of the Investment Advisers Act of 1940 or its rules.
To avoid requiring advisers and investors to renegotiate governing agreements for existing funds, the Commission adopted legacy status provisions applicable to certain of the restricted activities and preferential treatment provisions. Such legacy status will apply to those governing agreements entered into in writing prior to the compliance date and with respect to funds that have commenced operations as of the compliance date.
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