New SEC Rules For Advisors To Hedge And Private Equity Funds

US Securities and Exchange Commission will decide in order to go ahead with the adoption of new rules for advisors to hedge funds as well as private equity funds that are aimed at elevating transparency, competitiveness, and efficiency in a marketplace that is worth $25 trillion.

The SEC is going to vote on the proposal so as to update the so-called Form PF, which was brought to the fore because of the financial crisis of 2008-09, in order to monitor the risk across the private fund sector and thereby boost the quality of the disclosures by large fund deposits when it comes to their investment plan and leverage. Gary Gensler, the SEC chair, said at a Managed Funds Association conference that since the time the SEC put in place Form PF almost 12 years ago, a lot has transpired.

The new transparency of the proposal will relate to the expenses, the fee, the side letters, and also performance.

The changes in the rules will require private fund advisors like hedge funds and private equity firms to disclose quarterly details when it comes to their fees and expenses. This is done in a bid to shed light on the fast-growing market sector.

In the annual reports, the advisors will have to include information that’s related to their strategies, leverage use, and clawbacks pertaining to the general partner’s performance compensation. The SEC also happens to be working along with the Commodity Futures Trading Commission on yet another proposal that would, in a way, widen the reporting requirements for large hedge fund advisers.