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Albourne1 submitted to the US Securities and Exchange Commission (“SEC”) its views on the SEC’s Private Fund Proposed Reforms announced in February 2022.2
Please see the following link for the full response.
We believe Albourne is uniquely placed within the industry to comment on potential unintended consequences and the broader impact of the proposals given our team’s coverage of many critical areas impacted including investment strategy, operations, portfolio management, reporting and private funds’ terms review.
The SEC’s proposed reforms include sweeping changes that could materially impact the private funds industry.3 Albourne understands the concerns faced by investors as well as the challenges fund advisers will face to implement the proposals. The spirit of the proposals is to address many activities that have negatively impacted investors in the past. This could be due to inherent conflicts of the GP, a lack of transparency to investors or other factors.
Albourne is generally supportive of many of the proposals but also notes certain proposals and options outlined by the SEC could have unintended consequences. Given the length of the proposal and the number of questions asked by the SEC, Albourne did not attempt to cover all of them; instead Albourne has looked to highlight five key proposals and provide insight on some of the questions posed by the regulator.
The five key proposals covered are:
1. Quarterly statements
2. Mandatory private fund adviser audits
3. Adviser-led Secondaries
4. Prohibited activities
5. Preferential treatment
With the SEC’s public comment period closed, Albourne expects changes to be made to the final proposed rules.
The final proposal will likely push managers into a more institutional framework. While further progress is needed in the private markets space despite noticeable improvements since Dodd Frank, the downside with such proposals tend to be additional administrative burdens for smaller managers that will need to comply with the SEC’s new reporting requirements. This can increase costs, which in turn could be passed onto investors or reduce competitiveness by increasing the barriers to entry.
Albourne will continue to monitor changes to the proposal and assess how they impact the industry once they become finalized.
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1 “Albourne” and “we” refer to the group of companies comprising Albourne Partners Limited and its subsidiaries.
2 SEC announcement and proposal documentation is available for download at: https://www.sec.gov/news/press-release/2022-19
3 The SEC defines Private Funds as both Public and Private Market funds
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