Wednesday, June 12, 2024

SEC votes to adopt Form PF overhaul: industry reaction

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The SEC has voted to adopt its overhaul of how private fund advisers are regulated and update compliance rules in far-reaching changes.

The Form PF proposals, which had received strong pushback from the hedge fund industry, were passed but there were last-minute concessions which trade groups are still digesting

The final rules will require private fund advisers registered with the SEC:

  • To provide investors with quarterly statements detailing certain information regarding fund fees, expenses, and performance.
  • 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.

Advisers will be prohibited from providing investors with preferential treatment regarding redemptions and information if such treatment would have a material, negative effect on other investors.

In what looks like a concession by the SEC, it has agreed “legacy status provisions applicable to certain of the restricted activities and preferential treatment provisions” for agreements entered into before the changes.

AIMA CEO Jack Inglis said he welcomed many of the revisions.

“The February 2022 proposal contained a number of terms that would have stifled innovation, imposed disproportionate burdens on private fund market participants, and hindered the industry’s ability to deliver value to investors in a manner that balances risks and rewards in the ways investors are seeking,” he said.

“We note that the final version of the rules reflects many of the concerns raised by AIMA and other industry stakeholders. However, the rules adopted today still contain several areas of concern for AIMA and our global membership, which includes fund managers and investors of all sizes, and the final text will need to be examined in detail to identify where these remain.

“AIMA is reviewing these revisions and will seek clarification from the SEC on certain aspects. We are assessing the full impact that these rules will have on our members and will be discussing our options with AIMA’s governing board.”

Bryan Corbett, MFA president and CEO, said the MFA continues to have concerns.

“The final rule will increase costs, undermine competition, and reduce investment opportunities for pensions, foundations, and endowments.

“MFA will assess the final rule and work with our members to determine the appropriate next steps to protect the interests of alternative asset managers and their investors, including potential litigation.”