SEC aims to make private and hedge funds more transparent

The US Securities and Exchange Commission (SEC) is considering new rules for hedge funds and private equity funds. The measures aim to enhance transparency, competition, and efficiency in the $25tn market. The SEC will vote on updating Form PF, which was put in place following the 2008 financial crisis to monitor risks in the private fund sector.

Under the new rules, private fund advisers will have to disclose quarterly details about their fees and expenses. Large hedge fund advisors will have to report significant events indicating systemic risk and investor harm to financial regulators. The SEC also proposes an annual audit for each private fund under management and requires disclosures of “fairness opinions” summarizing certain business relationships.

SEC Chair Gary Gensler emphasizes the importance of transparency and highlights the proposed new transparency related to fees, expenses, performance, and side letters. These rules aim to provide greater transparency into private fund advisors’ activities, enhance the regulator’s monitoring capacity, and make the market more resilient. The SEC’s new rules are a response to the changing landscape of the private fund sector.