What the SEC’s PFAR Ruling Means for Investors and Private Funds

  • The Quarterly Statement Rule, mandating that advisers provide investors with disclosures regarding fees, expenses, performance and compensation in quarterly statements.
  • The Mandatory Audit Rule, requiring advisers to obtain a financial audit of each advised private fund.
  • The Restricted Activities Rule, prohibiting advisers from engaging in certain activities with private funds unless they provided disclosures and, in some cases, investor consent. This included allocating expenses to investors on a non-pro rata basis without notice.
  • The Preferential Treatment Rule, necessitating that advisers make disclosures of preferential terms offered to investors and, with some exemptions, prohibit advisers from offering preferential treatment that could negatively impact other investors.
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