In February, the US Securities and Exchange Commission (SEC) released proposed private fund reforms (the proposal) that could potentially alter the future of the private funds industry. In the first article in a two-part series, partner Christine Lombardo provides general observations on the Proposal and what it says about the SEC’s view of the private funds space.
Speaking to Hedge Fund Law Report about the SEC’s reliance on selected enforcement actions, Christine said, “The SEC cited a number of enforcement actions in [the Proposal]. It struck me that all of those cases were disclosure cases – the SEC didn’t claim the practices themselves were fraudulent, as I recall, but rather that the disclosure was inaccurate, inadequate or differed from the practice. With appropriate disclosure, investors should be able to make an informed decision and consent to the practice. But, it seems that the SEC thinks that it needs to go one step further and just prohibit certain activities it views as contrary to investor protection.”