SEC Adopts New Private Fund Adviser Rules

The SEC adopted its much anticipated private fund reforms on August 23, 2023. These reforms include several quarterly reporting requirements with respect to performance and fees and expenses, increased transparency regarding side letters and other "preferential treatment" for fund investors, prohibitions on certain liquidity rights and information sharing with fund investors, and limitations on the ability of fund managers to obtain reimbursement from private funds for costs associated with government investigations.

Nevertheless, taken as a whole, the reforms are less transformational than the proposal from February 2022. Rather than the proposed "prohibited activities rule," the SEC adopted a "restricted activities rule." This rule addresses many of the practices covered by the initial SEC proposal, such as fee and expense allocation practices and treatment of adviser clawbacks. However, for the most part the restricted activities rule creates disclosure