Proactive Compliance: Getting Your Program Ready for 2024

Regulatory Compliance
December 14, 2023

In the past year, we have seen a tremendous amount of activity from the U.S. Securities and Exchange Commission (SEC). From a flurry of proposals across a wide spectrum of areas to the adoption of significant rules, the SEC has made it clear that private fund regulation is top of mind.

As the year concludes, investment advisers should use the time to ensure full compliance with their regulatory obligations. Below, we highlight crucial year-end compliance considerations and explore the new and proposed SEC regulations affecting investment advisers.

Annual Compliance Obligations and Planning Ahead

Investment advisers have annual compliance obligations that must be met. While each compliance program is unique, there are standard annual and end-of-quarter compliance forms and attestations that must be completed. Key filings like the annual Form ADV amendments and Form PF are top priorities as the calendar year ends. Although filings are not due until the end of the first quarter of 2024, investment advisers should assess business and compliance program changes for potential updates to regulatory filings.

It is advisable for all investment advisers to review compliance policies and procedures at year-end to ensure effectiveness. This practice typically stems from the annual compliance review, which assesses adherence to internal policies and regulatory requirements. By diligently addressing these routine annual compliance obligations, advisers uphold transparency, protect client interests, and maintain industry standards.

Understanding New and Upcoming Regulations for Investment Advisers

The SEC has been active in rule-making this past year, with significant implications for private fund advisers. Advisers need to review their compliance infrastructure to adapt to these regulatory changes and update their compliance policies and procedures and calendars accordingly.

SEC Adopts Significant Amendments to the Private Fund Rules

In August 2023, the SEC adopted new rules and amendments for private fund advisers under the Investment Advisers Act of 1940. Arguably the most significant rule update in years, the new rules mandate a variety of reporting requirements, prohibitions, and disclosures for all private fund advisers, with material differences between registered investment advisers and exempt reporting advisers. Read our comprehensive summary of the changes here. While there is ongoing litigation surrounding the rule-making, private fund advisers should, at a minimum, begin preparations to understand how the rules will affect their organizations.

SEC Adopts Significant Amendments to Form PF

In May 2023, the SEC adopted amendments to Form PF to enhance systemic risk monitoring in the private funds industry. The new amendments will expand the Form PF disclosure requirements to require all private fund advisers subject to Form PF reporting to file new quarterly and annual reports. Gain further insight here.

Proposed SEC CybersecurityRegulations for Private Fund Advisers

The SEC is likely to implement a new cybersecurity rule to safeguard investors and provide for market stability. These regulations aim to improve cybersecurity-related information availability and streamline inspection and enforcement processes. While still in the proposal stage, investment advisers can take proactive steps to establish a robust framework. Read our article discussing this new rule and the steps fund managers can take now. 

Looking Ahead

Investment advisers should stay ahead of regulatory changes by implementing, maintaining, and testing a robust compliance program. The SEC's 2024 Exam Priorities, announced in October, will focus on concepts such as fees and expenses, valuation of illiquid assets, and conflict of interest disclosures. As we have seen in this past year's list of rule changes, the SEC will continue to examine advisers for compliance with the recently updated advertising rule and Form PF reporting changes. 

Important Compliance Dates to Remember

How Petra can help

Petra FundsGroup’s Compliance team has decades of experience managing SEC regulatory compliance programs for private fund advisers. The group’s expertise enables them to provide practical insight and guidance on a wide range of regulatory compliance services, from investment adviser registration to ongoing compliance support to performing SEC mock examinations. Learn more about Petra’s comprehensive compliance offering here.

Please get in touch with a member of Petra's compliance team with any questions you have about the SEC’s regulatory compliance matters.

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