October 14, 2024

A Win for Private Fund Managers: SEC's New Private Fund Adviser Rules Will Not Be Implemented

Recently adopted rules applicable to private fund advisers will not come into effect after all. These changes, which were adopted by the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940 (Advisers Act) last August, were vacated by the U.S. Court of Appeals for the Fifth Circuit in June 2024. The SEC has allowed the deadline for appeal to the U.S. Supreme Court to pass, meaning the rules will not be implemented.

The new rules would have significantly increased regulation of private funds and private fund advisers. At a high level, the Fifth Circuit found that the SEC did not have the authority to adopt the rules based on relevant provisions of the Advisers Act.

A Loss for Private Fund Managers (and Other Investment Advisers): FinCEN Imposes AML-Related Requirements

The Financial Crimes Enforcement Network (FinCEN) has adopted rules that will require both registered investment advisers (RIAs) and exempt reporting advisers (ERAs, which are generally exempt from substantive regulation) to implement anti-money laundering (AML) and “countering the financing of terrorism” (CFT) programs. Investment advisers would generally also be required to file suspicious activity reports (SARs).

The change will represent a significant additional compliance obligation for RIAs and ERAs, who should start putting applicable measures into place to fulfill those responsibilities. Additional information on the amendments is available here.

For more information on this rule or any related matter, please contact any member of Wilson Sonsini’s fintech and financial services practice, national security practice, or fund formation practice.