The Private Fund Adviser rules are complex, and different kinds of advisers must comply with a different set of requirements within the rules.
The steps below will help advisers determine which sets of rules apply to them and how to begin preparing for implementation.
First: Assess the scope of the rule. Adviser registration status will determine which parts of the rule apply. Advisers should determine if existing funds will have legacy status regarding certain restricted activities and preferential treatment rules based on expected subsequent closings. For advisers that intend to use existing fund documents as a template for future funds, the advisers should coordinate with counsel to identify provisions that are inconsistent with the rules.
Legacy status is only available for the aspects of the prohibitions aspect of the Preferential Treatment Rule and the aspects of the Restricted Activities Rule that require investor consent, and then only if amendments to the fund docs are required to comply. Advisers may also want to assess their fund documents for potential updates that might include more favorable provisions, for example, adding authority to charge certain fees or modifying procedures for engaging in restricted activities to match those paths to compliance required under the rule, which may be less draconian.
Next: Map out and document the firm’s road to implementation. SEC examiners scrutinized implementation following its adoption of the Marketing Rule. If a firm is unable to produce documentation to evidence an action being taken, examiners generally assume it did not happen.
Include the following components in the firm’s roadmap:
Still have questions?
Contact us today to set up a call with one of our regulatory experts.