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Regulatory Market Update

Published August 24, 2023

To our Members and the Fund Finance Community:

On August 23, 2023, the Securities and Exchange Commission adopted significant new rules under the Investment Advisers Act of 1940, which regulate private fund advisers. Certain of those rules relate to the use of fund financing, in particular subscription facilities. The rules were initially proposed to the public on February 9, 2022. In response to numerous comments, the SEC made multiple changes which modified or eliminated some of the widely discussed elements of its earlier proposal.

The rules cover a large number of issues and are complex (the SEC release is 660 pages long). One aspect which we believe is highly relevant to the fund finance industry, relates to certain reporting requirements placed on SEC-registered private fund advisers. Under the rules, investors in private funds managed by such an adviser need to be provided with quarterly (and annual) statements with certain performance metrics. The various performance metrics required by the adopted rule for purposes of such quarterly statements for illiquid/closed-end funds must be shown with and without the impact of fund-level subscription facilities (the earlier proposal contemplated showing performance metrics solely without the impact of subscription facilities).

The SEC asserted that most private fund advisers subject to such new rule are already reporting the required performance metrics with the impact of subscription facilities. Therefore, the SEC stated it does not anticipate that the new requirement would entail substantial additional burden for most private fund advisers. Such reporting taking into account subscription facilities, however, is not currently legally required until the compliance date. The rules are significant for both borrowers and lenders in the fund finance industry, because the SEC has specifically taken note of the usage of subscription facilities by private funds. It also created a definition of a subscription facility (which is any facility secured by the unfunded capital commitments of a private fund’s investors) for purposes of the rules.

The rules will become effective 60 days after publication in the Federal Register. The compliance date for the quarterly statements rule is 18 months after the effective date for all advisers subject to the rule.

The FFA is actively reviewing the rules and other relevant portions of the release and will provide further updates as appropriate.

If you have any questions on the rules in the meantime, please contact Holly Loftis (, Jan Sysel ( or your counsel.

The Fund Finance Association