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August 23, 2023

SEC’s Private Fund Adviser Rules Represent Forward Progress But Leave Investors in Private Funds Exposed to Conflicts of Interest and Shady Practices

WASHINGTON, D.C.—Today, the U.S. Securities and Exchange Commission (SEC) adopted final rules governing private fund advisers. Legal Director and Securities Specialist Stephen Hall released the following statement:

“The rules the SEC adopted today will increase the transparency of private funds, but they unfortunately retreated from some of the most important investor protections in the proposals.  They fall short of what’s necessary to protect investors from the appalling array of unfair, predatory, and opaque practices that have become all too common in the world of private fund advisers.  Those practices range from charging fees for services never performed to self-serving contract clauses that essentially repeal the core obligation of all advisers to act in the best interest of their clients.  These practices and abuses have arisen and persisted because the private fund industry has escaped meaningful transparency and oversight for far too long, even though it affects tens of millions of hardworking Main Street Americans.  These everyday Americans participate in the private funds market through pension plans and mutual funds, and this increasingly important financial sector must be made fairer.

“The final rules will certainly promote transparency through the required quarterly and standardized disclosures regarding fees and performance.  And they will establish an important annual audit requirement to ensure some independent insight into a fund’s condition and operations.  But in terms of protecting investors, the final rules have significant weaknesses.  For example, in place of outright prohibitions against a number of abusive practices, as in the proposal, the final rules allow these practices to persist, subject only to a set of permissive disclosure requirements, coupled in a few instances with consent.  This model simply won’t protect investors adequately and it is antithetical to the high fiduciary duty that is supposed to govern the conduct of all investment advisers. The final rules won’t even explicitly bar advisers from using contract clauses to insulate themselves from liability for misconduct, including liability for breach of their fiduciary duty.

“There is no adequate justification for weakening the reforms in the SEC’s original proposal.  The industry’s attacks on the proposed rules were groundless, predicated on myths that have proven hollow again and again.  All investors, whether rich or poor, are entitled to robust protection from abuse.  Moreover, not all institutional investors are sophisticated enough to fend for themselves, and none of the reforms were excessively costly or burdensome. And contrary to some claims, the SEC has ample legal authority to implement these reforms.”


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit


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