Latest SEC Proposal Could Change the Game for Private Funds, Affecting Billions of Dollars in North Texas

Securities Enforcement Defense attorney Scott Mascianica was quoted in a Dallas Business Journal article about a proposed rule from the U.S. Securities and Exchange Commission (SEC) that would increase regulation of private investment funds. The proposed changes, which include increasing the amount and frequency of disclosures, would affect many in Dallas, a hub for private equity and hedge fund firms as well as the organizations, institutions and high-net-worth individuals investing in them. Mr. Mascianica said a "tension point" of the proposal is whether the rule will truly benefit investors or simply create new burdens without providing meaningful information for more experienced investors.

"What is most interesting about the proposed rule is how sweeping it is in scope. Aspects of the proposed rule seek to treat registered private fund advisers like public company registrants, with quarterly reporting obligations and annual audits," he commented. "Further, the proposed rule creates additional books and records and compliance requirements, including on advisers that do not advise private funds. And, if approved, certain practices — even for those advisers not registered with the agency — would be prohibited."

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