SEC Introduces Stricter Fee Disclosure Rules for Hedge Funds and Private Equity Firms

Posted on September 13th, 2023 at 1:16 PM
SEC Introduces Stricter Fee Disclosure Rules for Hedge Funds and Private Equity Firms

From the desk of Jim Eccleston at Eccleston Law 

The US Securities and Exchange Commission (SEC) has adopted new rules that will compel hedge funds and private equity firms to provide more transparent information about their fees and impose restrictions on granting special privileges to investors.

Under these rules, private funds must disclose quarterly fees and expenses to investors, and firms cannot enable select investors to cash out more quickly than others unless such opportunities are offered to all fund investors. These measures represent the SEC's latest effort, led by Chair Gary Gensler, to increase oversight of the rapidly expanding multitrillion-dollar industry.

The rule also prohibits funds from imposing fees on investors to cover regulatory investigations and compliance costs unless investors consent to such costs. Additionally, it forbids funds from levying these fees and expenses if the regulatory actions lead to court- or government-imposed sanctions.

Notably, the SEC intends to eliminate a provision that simplifies the process for investors to sue fund managers in case of investment losses. However, some fundamental aspects of the rule remain intact. To address conflicts of interest, the SEC will prevent private funds from burdening one group of investors with an excessive share of fees beyond what is fair unless this practice is disclosed. If firms arrange a secondary deal to allow investors to cash out and transfer older positions from one fund to another, they must engage an independent auditor to ensure that investors receive equitable treatment.

According to AdvisorHub, industry groups have criticized the SEC for exceeding its authority under Gensler's leadership. The Managed Funds Association warned its members that it might initiate legal action against the regulator within two weeks of the finalization of the new regulations unless they are substantially softened from what the agency proposed in February 2022.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, sec

Return to Archive

TESTIMONIALS

Previous
Next

Fantastic news!!!!  Your professionalism, support and expertise were greatly appreciated.  You made a difficult situation much more bearable.

Marci M.

LATEST NEWS AND ARTICLES

December 2, 2025
Crypto's Leverage Shakeout Exposes Structural Risks

The crypto market’s recent downturn erased nearly $20 billion in leveraged positions within hours and half a trillion dollars in market value over a single weekend.

December 1, 2025
UBS Winds Down Funds as First Brands Bankruptcy Ripples Through Global Markets

UBS Group AG has begun liquidating two invoice finance funds with direct exposure to First Brands Group, marking one of the earliest moves by a major financial institution to contain the fallout from the bankrupt auto-parts supplier’s collapse, as reported by Bloomberg Law.

November 26, 2025
Former GWG Chair Charged in Alleged $150 Million Fraud Scheme as Investor Losses Mount

Federal prosecutors have intensified scrutiny of the long-running collapse of GWG Holdings Inc., unveiling criminal charges against Bradley Heppner, the former chair of both GWG and Beneficient.