… In 2023, the SEC will likely substantially increase its enforcement arsenal tailored to private fund advisers. In 2022 and continuing into 2023, the SEC has proposed and continues to propose new rules and rule amendments that, if implemented, could create material shifts in the principles, prohibitions, limitations and requirements for private fund advisers in carrying out their investment advisory businesses, including on investor and client reporting, limited partnership agreement negotiation and drafting, vendor agreement negotiation and drafting, advertising, and custody practices, liquidity transactions, and fee and expense mechanics. One proposed set of reforms alone that is likely to be finalised in the coming weeks or months, known as the Private Fund Proposed Reforms, could play a significant role in this shift.2
In this landscape, EXAMS likely will sharpen its focus on conflicts of interest the SEC believes are inherent in the private fund industry and which, the SEC believes, contribute to the perceived problematic issues discussed in the Private Fund Proposed Reforms. These include, for example, those related to portfolio valuation and resulting fee calculations, as well as conflicts related to liquidity. A resurgence of SEC enforcement against private fund advisers is likely to follow.
‘Enforcement 40’ for 2020
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