The SEC took steps this week to get a better handle on what’s happening at often opaque private investment funds.
The Securities and Exchange Commission on Thursday released a risk alert outlining compliance problems it observed during five years of examinations of private fund advisers. The latest alert is a follow-up to a similar survey of private funds released in June 2020.
Earlier in the week, the SEC released a proposal to require private funds to disclose more information on the Form PF, a document they have had to file annually with the agency for about a decade.
Under Chairman Gary Gensler, the SEC is taking a closer look at private funds, which have been aggressive in gobbling up registered investment advisory firms.
“The Gensler SEC has focused its regulatory attention on private equity and hedge funds,” Todd Cipperman, principal at Cipperman Compliance Services, wrote in an analysis.
Investment advisers to private funds comprise a growing area of SEC oversight. More than 5,000 advisers, or approximately 35% of all advisers registered with the agency, manage approximately $18 trillion in private fund assets, the risk alert states. They do so through hedge funds, private equity funds, and real estate funds.
Private funds can range from those that are “made up of friends and family” to those that have hundreds of billions of dollars in assets, according to the alert.
The SEC found that private fund advisers failed to act in accordance with fund disclosures regarding the calculation of management fees, investment strategy and liquidation procedures, among other areas.
During the exam sweep, the SEC also found that private fund advisers made misleading disclosures about fund performance and failed to conduct reasonable due diligence about underlying investments or funds.
“Examinations of private fund advisers have resulted in a range of actions, including deficiency letters and, where appropriate, referrals to the Division of Enforcement,” the alert states.
On Wednesday, the SEC released a proposal that would amend Form PF to require private funds to report within one business day events that could cause significant stress to the fund. The additional information would help the SEC and the Financial Stability Oversight Council monitor funds for their potential impact on financial markets.
“We now have almost a decade of experience analyzing the information collected on Form PF,” the proposal states. “In that time, the private fund industry has grown in size and evolved in terms of business practices, complexity of fund structures, and investment strategies and exposures. Based on this experience and in light of these changes, the Commission and FSOC have identified significant information gaps and situations where more granular and timely information would improve our understanding of the private fund industry and the potential systemic risk within it, and improve our ability to protect investors.”
FINRA's proposed rule filing would create a new 10-day fraud delay and nearly triple the maximum hold period for exploited senior investors
Fueled by a recent shot in the arm from private equity firm Carlyle, MAI adds a $490 million Atlanta RIA as it keeps building out its national footprint.
“Todd Burkhalter organized what is likely the largest Ponzi scheme in Georgia history,” said one FBI official.
With experience from Goldman Sachs and TD Ameritrade, the RIA's newest SVP hire adds to a recent wave of executive departures from hybrid Osaic.
Chicago-based Mesirow Fiduciary Solutions adds flexPATH's plan-level outsourced fiduciary book, boosting its retirement market reach to $164 billion.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
