SEC passes sweeping new rules for private fund advisers

The Securities and Exchange Commission (SEC) passed a sweeping set of rules for the $26 trillion private fund industry designed to increase transparency and competition but with provisions that address industry concerns about potential overreach.

The rules and amendments to the Investment Advisers Act, approved by the SEC in a 3-2 vote Wednesday, target certain practices in the private funds industry that “may impose significant risks and harms on investors and private funds,” according to an SEC fact sheet.

Those practices include conflicts of interest generated by the charging of certain fees and expenses (restricted activities rule), as well as preferential treatment offered to some fund investors—but not all—through the use of side letters (preferential treatment rule).

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