On February 9, 20221, the US Securities and Exchange Commission (“SEC” or “Commission”) proposed new rules (“Proposed Rules” or “Proposal”) under the Investment Advisers Act of 1940 (“Advisers Act”) and the Investment Company Act of 1940 (“Investment Company Act”) to require that registered investment advisers to private funds provide transparency to their investors regarding the full cost of investing in private funds and the performance of such private funds. The proposed rules would require an adviser to obtain an annual financial statement audit of each private fund it advises and, in connection with an adviser-led secondary transaction, a fairness opinion from an independent opinion provider. In addition, the proposed rules would prohibit all private fund advisers, including those that are not registered with the Commission, from engaging in certain sales practices, conflicts of interest, and compensation schemes that are deemed contrary to the public interest and the protection of investors. Under the Proposed Rules, all private fund advisers would be prohibited from providing preferential treatment to certain investors, unless an adviser discloses such treatment to other current and prospective investors. Corresponding amendments to the Advisers Act books and records rule are also included in the proposal. Finally, the Proposal includes amendments to the Advisers Act compliance rule, which would affect all registered investment advisers, requiring written documentation of an adviser’s annual review of policies and procedures.
NRS, a ComplySci Company, appreciates the opportunity to comment on this important Proposal and respectfully submits the following response.