SEC Adopts and Amends Rules for Private Equity and Hedge Funds – Audit Requirement Notice

On Wednesday, August 23rd, the Securities and Exchange Commission (SEC) adopted sweeping changes related to investment advisors and private funds.  While the rule applies broadly to relevant investment advisors, the overall impact of these rules my differ depending on each Fund’s unique characteristics.

Several of the key provisions include:

  • Registered private fund advisors must obtain annual audits for each Fund they advise that meets the requirements of the audit provisions in the Advisors Act Custody Rule (Rule 206(4)-2). The auditor will need to be by independent and registered with and subject to regular inspection by the Public Company Accounting Oversight Board (PCAOB).
  • Private fund advisors that are required to be registered will need to provide certain performance and fee disclosures enumerated in this new guidance.
  • Additional restrictions or requirements related to secondary transactions, Side Letter agreements, and other specific activities so outlined.

Whitley Penn believes that private funds should begin to coordinate and prepare for compliance with these new requirements which in general become effective 18 months from publication in the Federal Register. For the amended Advisors Act compliance rule, these are required 60 days after publication in the Federal Register. We believe that Funds should consider the overall impact of these requirements into their working plans for existing Funds and those in the Fund Raising stage.

If you are interested in further discussing Whitley Penn’s thoughts on how this might impact your Fund, please reach out to one of our Private Equity Leaders below:

Jeff Edwards


Brian Mitchell

Brian Mitchell


Daniel Boarder


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