New ruling overturns requirement of funds registered with SEC to provide investors with quarterly statements or annual audits, and limits preferential treatment.
In 2023, the Securities and Exchange Commission (SEC) issued final rules to enhance the regulation of private fund advisors. The SEC believed these new rules would protect investors by providing transparency into the operations of their investment.
In June 2024, the 5th U.S. Circuit Court of Appeals agreed with several private equity and hedge fund groups that the SEC had exceeded its statutory authority by issuing these rules.
This ruling overturns the requirement of funds registered with the SEC to provide investors with quarterly statements or complete annual audits, and limited the ability of fund advisors to give preferential treatment to investors.
At this point it is unclear how the SEC will respond to this ruling.
How we can help
Laws and regulations for private fund advisors are constantly evolving. Industry-specialized professionals like Andrew Huss or Jon Haidet can review existing fund documents, side letter agreements, and fee allocations to portfolio investments.
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