Regulation Update: PE and hedge funds brace for new SEC rules
- September 1, 2023: Vol. 10, Number 8

Regulation Update: PE and hedge funds brace for new SEC rules


Private equity and hedge funds are bracing for what could be the biggest regulatory challenge in years to their business of managing money for deep-pocketed investors. The SEC is preparing to adopt a rule package as soon as this month, aiming to bring greater transparency and competition to the multi-trillion-dollar private-funds industry, people familiar with the matter said. SEC chairman Gary Gensler has said he hopes to bring down fees and expenses that cost hundreds of billions of dollars a year. Since the agency first proposed new rules for the industry last year, representatives of private equity, hedge funds and venture capital have met frequently with SEC officials to try to dissuade them, SEC meeting logs show. (Wall Street Journal)


The SEC has alerted broker/dealers to deficiencies found during exams as it relates to key anti-money laundering requirements. According to the agency’s Risk Alert, some B/Ds “did not appear to devote sufficient resources, including staffing, to AML compliance given the volume and risks of their business.” This issue can be exacerbated, the SEC warned, “in the current environment of new and increasing sanctions imposed by the Office of Foreign Assets Control against individuals and entities, particularly where the same firm personnel perform both AML and sanctions compliance functions.” (ThinkAdvisor)


With a temporary reprieve from in-person inspections set to expire at the end of the year, the SEC issued a fresh request for comment on an amended Financial Industry Regulatory Authority proposal for a three-year pilot program allowing firms to remotely examine branch offices. The SEC’s notice comes after FINRA filed an amendment tweaking the remote pilot plan on Aug. 1, one day before the SEC’s deadline to approve or shoot down an earlier redraft of the proposal. FINRA’s latest tweaks appear to represent mostly marginal clarifications, including adding language that further emphasizes that firms must “take into consideration any red flags” when determining whether to conduct a remote inspection. The deadline for comments will be 21 days following the SEC’s publishing of the notice in the Federal Register plus another 14-day period for follow-ups. (AdvisorHub)


The $10,000 cap on the state and local tax deduction is bedeviling Congress and is delaying House consideration of a tax package reported earlier by the House Ways and Means Committee. Suburban lawmakers, who largely hail from competitive districts in high-tax states, say they will block a GOP tax bill unless the top tax writer, Rep. Jason Smith (R-MO), agrees to raise or scrap the $10,000 limit. The issue is complicating legislation that Smith and House GOP leaders want to pass that would reverse business-tax increases that Republicans baked into the 2017 law and that took effect in recent years. Without quick action by Congress, many small research-intensive companies face enormous tax bills because of a provision that changed how they deduct research costs. Smith said he has been meeting with Republicans from high-tax states and is confident he has enough votes to get his bill through the House after Congress’s summer break. (Wall Street Journal)


The House Financial Services Committee has advanced four bills along party lines aimed at combating the influence of ESG investing in the nation’s financial markets. One of the bills, the Guiding Uniform and Responsible Disclosure Requirements and Information Limits Act, is in direct response to the SEC’s public company climate disclosure proposal. The GUARDRAIL Act would stipulate that companies are required to disclose only material information, which under the bill does not include climate-related information and requires the SEC to publicly list and explain any nonmaterial disclosure demands. The committee also approved a bill that would clarify that the SEC does not have the power to regulate shareholder proposals and would prevent the agency from forcing companies to include or discuss shareholder proposals. Another bill passed would raise the resubmission thresholds for shareholder proposals and allow companies to exclude environmental, social and political proposals. The fourth bill would increase transparency and congressional oversight of federal banking regulators and their interactions with international organizations to limit their influence on U.S. banking policy. (Pensions & Investments)


This report was compiled by the Alternative & Direct Investment Securities Association (ADISA). Visit the ADISA website ( to stay current on all of the organization’s advocacy initiatives.

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