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Navigating the New SEC Regulations for Private Fund Investments: A Transparent Future

The Securities and Exchange Commission (SEC) recently introduced new regulations that have significant implications for private fund managers aimed at enhancing transparency and investor protection.

Here’s are three major updates that asset managers and their teams need to know, and how AltExchange’s Digital Custodian Platform can help you meet them.

1. Fund advisers must provide quarterly statements

One of the most notable changes introduced by the SEC is the requirement for private fund advisers to provide quarterly statements to investors. This initiative seeks to boost transparency by ensuring that investors have a clearer picture of their investments on a regular basis. The quarterly statements must include comprehensive details such as fund performance, fees, and expenses.

This development is a significant stride towards accountability and empowers investors with real-time insights into their investments. AltExchange can automate quarterly statement distribution, and will instantly notify your investors when they’ve received one – stored and available for access at any time, directly on the platform. Transparent reporting allows asset managers to better foster trust and strengthen relationships with their clients.

2. Fund advisers must provide detailed performance reporting

For illiquid funds, the SEC has mandated detailed performance reporting, which includes data since the fund’s inception. This requirement extends to providing an overview of contributions and distributions. The performance reporting is divided into two categories: Gross Metrics (Gross IRR and Gross MOIC) and Net Metrics (Net IRR and Net MOIC).

Financial advisor using third-party data delivery tool to analyze clients' investment data.

Additionally, private fund advisers must provide Gross IRR and Gross MOIC for both the realized and unrealized portions of the fund’s portfolio, with a clear demarcation between realized and unrealized performance.

Designed to give investors a comprehensive view of their investments, AltExchange provides digital, automated performance reporting, plus a historical performance overview shown through easy-to-understand visuals. To see for yourself, please get in touch.

3. Funds must conduct a mandatory annual audit

To fortify investor protection, private funds advised by an SEC-registered adviser must undergo an annual audit (PS: We automatically collect and store documents including audits, updates, capital calls, distribution notices, tax documents and more). This audit ensures that the fund’s financial statements accurately reflect its financial position and operations. Furthermore, in the event of a fund’s liquidation, a prompt audit is required to maintain financial accuracy and investor protection until the fund’s termination.

The annual audit not only bolsters investor confidence but also aligns with industry best practices. It underscores the importance of accurate financial reporting and accountability within the private fund management sphere.

The Bottom Line

At AltExchange, we understand the challenges that asset managers face in adapting to these new SEC regulations. We are committed to helping fund managers seamlessly navigate the changing landscape of private fund investments. Our technology solutions empower fund managers to provide increased transparency with ease to their registered investment adviser (RIA) clients and investors.

As these regulations usher in a new era of transparency and investor protection, AltExchange stands as a reliable partner for asset managers. To witness firsthand how our solutions can help you meet these regulatory demands and enhance your client relationships, please get in touch.

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