How to Navigate Private Fund Compliance in 2025?
VIGILANT INSIGHTS
Introduction
This past year had Private Fund Compliance Programs on a heightened sense of awareness.
Private Fund rules initially adopted in 2023, with some effective dates for the fall of 2024, were overturned by an appellate court in June of 2024. At that time, the SEC made no indication that they would attempt to appeal the court’s decision.
In addition to these decisions, amendments to Form PF were adopted in February of 2024 but extended in January 2025 until June 12th, 2025.
With all of this regulatory activity, and the potential changes under a new administration, we have provided key compliance tips for Private Fund Advisers.
Key Compliance Focus Areas For Private Funds
- Form PF Amendments
- Filers will now have to separately report each component Fund of a Master-Feeder arrangement and parallel Fund structure.
- Advisers must include the value of Private Fund investments in other Private Funds when determining whether the Adviser meets the filing threshold to file Form PF.
- Advisers must identify trading vehicles in section 1b of Form PF and report on an aggregated basis for the reporting Fund and all trading vehicles on a consolidated basis.
- Quarterly filers are required to file on a calendar quarter basis.
- Amendments have been made to 1a and 1b requiring additional identifying information.
- Additional reporting for Hedge Fund Advisers in section 1c, 2a, and 2b of Form PF.
- Amendments have been made to section 3 of Form PF for Liquidity Fund Advisors.
- Off-Channel Communications
- Be sure to archive business communications.
- Ensure that all senior members of the firm are on board with the policies and procedures and continue to enforce a culture of compliance.
- Train employees to have a very broad definition of investment advice and business communication; the SEC may interpret a communication as investment advice even if the employee did not.
- Marketing Rule
- Assess your policies and procedures around the production and compliance review of marketing materials to ensure that they are updated to comply with the Marketing Rule.
- Provide easily accessible records of marketing materials, advertisements, questionnaires, etc.
- Be prepared to provide quality substantiation to all material statements of fact and ensure that true statements are not being presented in a materially misleading manner.
- Review any use of testimonials and third-party ratings/rankings for compliance with the prohibitions of the Marketing Rule.
- Gross and Net Performance IRR must be presented and calculated over identical time periods and with the same prominence.
- Cybersecurity
- Adopt an Incident Response Program as part of your written policies and procedures under the Safeguards Rule that is reasonably designed to detect, respond to, and recover from unauthorized access of customer information.
- Amend your policies and procedures to ensure that notification occurs no later than 30 days if an incident occurs.
- Develop procedures for providing on-going due diligence of vendors in accordance with oversight requirements.
Vigilant’s Conclusion
Although the future level of scrutiny on Private Funds remains uncertain, it is wise for their compliance departments to thoroughly review and update their policies and procedures in preparation for upcoming regulations and those already in effect.
Private Funds may still face increased scrutiny if they fail to make necessary changes to their compliance frameworks. Vigilant offers Outsourced Compliance Services, customized to meet the specific needs of your business.
Book a call with Vigilant to learn how we can support your needs.