Gensler Defends SEC Private Fund Proposals at MFA Forum

Published on May 5th, 2023 |

News and Alerts

Brief Introduction

SEC Chairman, Gary Gensler, spoke in front of the Managed Funds Association (“MFA”) about the reasoning behind the multiple SEC proposals affecting Private Fund Advisors.

Reminding the association that their clients are not the same as the SEC’s, Gensler discussed the importance of the SEC mission to protect investors, maintain fair and efficient markets, and facilitate capital formation.

He focused on how recent SEC actions will promote efficiency, integrity, and resiliency.

Efficiency from the Private Fund Advisor Proposal

The February 9^th 2022 Proposal hopes to promote competition and efficiency using “tools of transparency and market integrity”.
Gensler does not see his congressional mandates from 1996 as excluding “so-called sophisticated investors”.
The transparency requirements specifically involve fees, expenses, performance, and side letters.

Improving Integrity and Disclosures

Their Proposals aim to reduce information asymmetries between borrowers and sellers in securities lending and make aggregate data about large short positions available.
Safeguarding rules were designed to protect client assets if advisers or custodians go bankrupt.
The SEC proposes to shorten the deadline to 5 days for newly beneficial owners of public companies with control intent to report their ownership.
The requirement of prompt disclosure for large security-based swap positions should strengthen investor protection, limiting the risk of credit default swaps that played a large role in the 2008 crisis.

Promoting Resiliency

The SEC hopes to prevent failures in one section of the financial system from spilling over into the broader economy and causing financial casualties among average people.
He discussed plans to consider adopting amendments to Form PF and rules regarding disclosures required for large hedge fund advisers.
- As of May 3rd, 2023, the amendments to Form PF are now adopted.

Vigilant's Conclusion

Vigilant’s Conclusion

At a time when Firms push to meet compliance deadlines, it is evident that the SEC plans to elevate the regulatory environment around Private Funds with the adoption of multiple Proposals.

Ultimately, his interest is in helping investors and issuers even at the expense of the advisers existing in the industry intermediaries.

As previously announced Proposals are now up for adoption, it will be essential for Private Fund Advisers to invest in ongoing compliance support to manage the dynamic and aggressive regulatory climate.

Please reach out to Vigilant to learn about our support process, and how we can help reduce your risk of costly regulatory headaches.