Original SEC Rules for Private Equity
In April 2024, Ultimus reported on the recent Securities and Exchange Commission’s (SEC) implemented regulations and updates known as the “Private Fund Adviser Rules” (Rules) under the Investment Advisers Act of 1940 in a blog titled, “Understanding the SEC Rule for Private Equity”. The Rules required advisers to reassess their operations, modify their existing procedures to enhance transparency and restrict certain activities that were considered detrimental to investors. These regulations were sought to impact both SEC-registered and unregistered private fund managers.
The Private Fund Adviser Rules were comprised of five sets of rules and are categorized into two sections: Registered Private Fund Advisers and All Private Fund Advisers. The rules were intended to go into effect at various times, within 12-18 months after the August 2023 SEC ruling publication.
Private Funds Rules Dropped
On June 5, 2024, the United States 5th Circuit Court of Appeals issued a decision vacating the SEC private funds rule. The court determined that the SEC failed to justify the necessity and scope of the new requirements in relation to investor protection and market stability. The court’s ruling impacts all aspects of the previously established rule for private equity and hedge funds, effectively nullifying its application.
In light of this development, the SEC is currently reviewing the ruling and evaluating potential next steps such as appealing the ruling to the Supreme Court. The impact of this decision is significant for investment advisers who were subject to the private funds rule as they are no longer required to comply with its reporting requirements. All stakeholders are advised to stay informed on further updates as the situation evolves. In the meantime, it is important to understand the background and implications of this ruling.
How Ultimus is Monitoring
Ultimus will continue to observe for any other updates that may occur. Staying vigilant in the ever-evolving regulatory landscape is integral to our commitment to providing exceptional services. Should there be any future private fund rule changes, we will work with clients accordingly. Our proactive approach ensures that we are always prepared to address new regulations and adapt our strategies to maintain compliance. Clients can trust in our experience and dedication to navigate these changes seamlessly, allowing them to focus on their core business operations with confidence.
For more information on Ultimus’ private fund services, please visit us at: https://www.ultimusfundsolutions.com/our-services/private-funds/
ULP-COD00000359 06/11/2024
