In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important SEC enforcement developments from the past month, with links to primary resources. This has been a busy month for SEC rulemaking and enforcement alike, and we examine the following questions:
- What can we glean from the recently issued proposed rules targeted at investment advisers, including advisers to private funds and institutional investment managers?
- How does the SEC propose to strengthen its whistleblower program?
- Can cooperation with the SEC mitigate adverse outcomes?
- What do the SEC’s actions signal about its priorities?
1) Proposed Rule Changes on Private Fund Adviser Reporting, Cybersecurity, and Short Sales: In February 2022, the SEC voted to propose three sets of rules that would (1) impose new disclosure requirements on private fund advisers, (2) specify cybersecurity risk management requirements for registered investment advisers (RIAs) and others, and (3) increase short sale disclosure obligations on certain institutional investment managers. The thread linking these proposed rules appears to be an effort by the SEC to promote greater transparency and disclosure to investors.
First, on February 9, 2022, the SEC proposed new rules related to periodic disclosures by private fund advisers that impose heightened disclosure and other requirements on RIAs and exempt reporting advisers to private funds. The proposed rules would require these advisers to provide private fund investors with quarterly statements, cause the private funds to undergo financial statement audits, distribute to investors a fairness opinion under certain circumstances, and prohibit certain practices and undisclosed preferential treatment, among other things.
