SEC Adopts Sweeping Private Fund Adviser Reforms

On Aug. 23, 2023, the U.S. Securities and Exchange Commission (SEC), in a 3-2 vote, adopted new rules under the Investment Advisers Act of 1940 (Advisers Act) that will have a sweeping impact on investment advisers of private funds. This alert summarizes the adopted rules and highlights some key observations and issues for investment advisers to consider.

Key observations

• The SEC dropped the proposed general prohibition on hedge clauses (i.e., waiver or indemnification provisions) but clarified that an adviser seeking reimbursement, indemnification or exculpation for breaching its federal fiduciary duty would violate the antifraud provisions of the Advisers Act.