The US securities regulator on Wednesday adopted new rules that will shine a light on private equity and hedge fund expenses and fees, in what executives and lawyers said marks a sweeping overhaul for an industry long criticised for its opacity.
The new rules require private funds to issue quarterly fee and performance reports, and to disclose certain fee structures while barring giving some investors preferential treatment over redemptions and portfolio exposure. The rules also require funds to perform annual audits. While the changes mark the biggest overhaul of industry rules in years, the SEC rowed back on some proposals after major players, including Citadel and Andreesen Horowitz, argued that the agency was overreaching its authority by attempting to bar long-established fee structures and liability terms.
“This is still a sweeping series of rules for private fund managers that will have significant effects,” said Kelly Koscuiszka, partner with Schulte Roth & Zabel law firm in New York.