Overview of New SEC Private Fund Rules — and What They Mean To You

New SEC rules create substantial 2025 reporting hurdles for registered private fund advisors.

On August 23, 2023, the SEC enacted a sweeping new set of rules applicable to private fund advisers designed to provide greater transparency and oversight. The new Private Fund Rules consist of the following five sets of regulations:

Restricted Activities Rule

This section forbids charging fees or expenses for specific activities without advance disclosure or consent, including Regulatory, Compliance, Examination and Investigation expenses. Post-tax clawbacks, borrowing and extension of credit are also impacted.

Preferential Treatment Rule

This set of rules curbs preferential treatment for one set of investors in areas involving redemption and transparency, specifically if such preferences might have a negative impact on other investors.

Quarterly Statement Rule

Under this rule, advisers must prepare a quarterly statement that discloses fees, expenses and performance figures for each private fund the manager advises. Different deadlines apply to different types of funds, and consolidated reporting for similar pools of assets is required if it would provide more meaningful information to investors.

Audit Rule

Investment advisers must obtain an annual financial statement audit of the covered private funds they advise. The audit must be:

  • conducted by an independent public accountant that meets certain qualification requirements
  • in accordance with generally accepted accounting principles (or other standards such as U.S. GAAP)
  • delivered on an annual basis within 120 days of the private fund’s fiscal year-end.


Adviser-Led Secondary Rule

This rule requires advisers to distribute information to investors prior to adviser-led secondary transactions, including:

  • a fairness opinion or valuation opinion from an independent opinion provider
  • a written summary of any business relationships between the adviser and the independent opinion provider within the two-year period immediately prior to the issuance date of the fairness or valuation opinion


What does this mean to you?

Simply put, the new SEC Private Fund Rules will necessitate a greater degree of disclosure and reporting in several key areas before 2025 — much of which must be prepared by third party or PCAOB firms. These regulations will require timely and stringent reporting in areas including:

  • written notice to prospective and current investors regarding any preferential treatment
  • quarterly reporting on private fund adviser compensation, fees and expenses
  • quarterly reporting on performance
  • annual audit of private funds, with audited financial statements delivered to investors
  • for adviser-led secondary transactions, a fairness or valuation opinion must be distributed, along with the disclosure of any business relationship with the independent opinion provider
  • a written annual review of their compliance policies and procedures


The application of these rules, and their related deadlines, may vary based on the size of the funds, type of fund, and whether or not the advisers are registered.

In the final analysis, the new SEC rules will provide greater transparency, disclosure, and peace of mind for investors. But, in the process, it also creates a new burden for advisors of private funds. — and a new hurdle for growing funds that may be approaching required registration. It also increases the need for outside, objective, third-party review of many areas of larger funds.


As a Top 25 Accounting Firm, HORNE has the expertise and capabilities that Private Fund Advisers need — including the mandatory PCAOB Certification that is required by the new SEC rules. To find out more about the 2023 SEC Private Fund Rules and how you can ensure compliance, contact us today to arrange a no-obligation, complimentary consultation.



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