The SEC's Private Fund Adviser Rules Explained — Part 2: The Preferential Treatment Rule

On August 23, 2023, the U.S. Securities and Exchange Commission (SEC) adopted new and amended rules under the Investment Advisers Act of 1940, as amended (the Advisers Act), to address certain conflicts of interest and promote investor protection in the private funds industry (the Private Fund Adviser Rules).¹ We recently released a Client Alert providing an overview of the Private Fund Adviser Rules and a Client Alert addressing one of those rules, Rule 211(h)(2)-1 (the Restricted Activities Rule), which limits the ability of advisers to private funds regardless of whether they are registered as investment advisers with the SEC or one or more states or exempt from such registrations (private fund advisers) to engage in certain practices. This Client Alert addresses another of the Private Fund Adviser Rules, Rule 211(h)(2)-3 (the Preferential Treatment Rule), which prohibits private fund advisers from (i) providing certain preferential redemption and transparency terms