SEC Issues Proposed Rules Impacting Private Funds And Their Advisers

On December 27, the SEC released the text of its proposed new rules that would impact advisers to hedge funds and other pooled investment vehicles. The SEC originally voted to propose the new rules on December 13. As described more fully below, the proposed new rules would prohibit advisers to pooled investment vehicles from making false or misleading statements or otherwise defrauding investors or prospective investors in those vehicles. The proposed new rules also would revise the definition of accredited investor as it relates to natural persons investing in a pooled investment vehicles relying on Section 3(c)(1) of the Investment Company Act. See Prohibition of Fraud by Advisers to Certain Pooled Investment Vehicles; Accredited Investors in Certain Private Investment Vehicles, Securities Act Release No. 8766 (Dec. 27, 2006), available at: http://www.sec.gov/rules/proposed/2006/33-8766.pdf.