More Lessons for Private Fund Advisors, BDs & NFA Member Firms Get Continued Relief from In-Person Inspection Rule: Regulatory Update for February 2022

Mid-February Regulatory Updates from Cari Hopsfenperger at Foreside.

Topics include:

Read more here.

The SEC proposed new rules last week to enhance Form PF reporting

As background, Form PF requires private fund advisers with at least $150 million in private fund assets under management to report certain information to the SEC at least annually and for a subset of large private fund advisers to provide more information on a more frequent basis.

The rule proposal makes changes in three principal areas including:

  • Requiring current reporting by large private fund advisers for certain triggering events.
  • Change reporting thresholds and require additional information to be reported by large private equity advisers.
  • Require additional reporting by Large Liquidity Fund Advisers.

Read more here.

Effective Succession Planning For Advisers

It’s imperative that advisers protect themselves and the clients they have worked so hard for through proper succession planning. Understandably, many advisers are not yet ready to sell their practice, but there are still numerous things advisers can do to protect their loved ones and their clients in the meantime.

One of those things is to enter into contingent buy-sell agreements whereby the adviser puts in place arrangements to sell the practice to another adviser in the event of the death, disability, or retirement of the adviser.

Read more here about additional considerations.

SEC Proposes New Cyber Rules For Advisers

On February 9, 2022, the SEC proposed new rules that require investment advisers registered with or required to register with the SEC to adopt policies and procedures reasonably designed to address the cybersecurity risks they face as well as to conduct periodic assessments and annual reviews of their cybersecurity programs. The proposed rules would also require advisers to make and update public disclosures on Form ADV regarding cybersecurity risks and significant cybersecurity incidents and to make additional confidential disclosures to the SEC regarding cybersecurity incidents experienced by the firm or any funds they manage within 48 hours of a cybersecurity incident.

The rule proposal, if adopted, will invariably require advisers to devote significantly more time and resources to cybersecurity risk management.

Read more here.

SEC’s Private Fund Risk Alert — Additional Deficiencies Found

Signaling its increased scrutiny of private fund managers (including hedge, private equity, and venture capital fund managers), the SEC yesterday supplemented its June 23, 2020 Private Fund Risk Alert to identify additional deficiencies identified in recent examinations of such advisers which included the following:

  • Deficiencies in following disclosures in fund offering and other materials
  • Deficiencies pertaining to performance presentations and marketing
  • Deficiencies related to due diligence
  •  Deficiencies pertaining to misleading hedge clauses in documents that purported to waive or limit the Advisers Act fiduciary duty except for certain exceptions, such as a non-appealable judicial finding of gross negligence, willful misconduct, or fraud which are currently found in almost all fund offering documents.

Read more here.