SEC Imposes New Burdens on Registered and Exempt Private Fund Advisers

On August 23, 2023, the U.S. Securities and Exchange Commission (SEC) voted 3-2 along party lines to adopt new rules under the Investment Advisers Act of 1940 (the Advisers Act) for investment advisers to private funds. While they don’t go as far as the SEC’s original proposal, the rules impose significant new obligations and restrictions on private fund advisers.  Some of these apply to all private fund advisers, including venture capital fund advisers (VC Fund Advisers) and other exempt reporting advisers (ERAs), while others apply only to SEC-registered private fund advisers (RIAs). 

Crucially, the new rulemaking affords “legacy” status to certain existing arrangements that would otherwise be prohibited. Where noted below, a provision does not apply to “legacy” contractual agreements that (a) “govern the fund,” such as the fund’s operating and organizational agreements, subscription agreements, and side letters, or (b) “govern the borrowing, loan, or extension of credit entered into by the fund,” such as promissory notes, credit agreements, and provisions in the fund’s governing agreements. 

Read the full blog on Asset Management Advocate.