A proposal to update rules covering how investment advisers communicate had some investor and private fund groups expressing concern in letters submitted to the Securities and Exchange Commission ahead of Tuesday's deadline.
"The proposed changes to the advertising and solicitation rules would fundamentally change the way our industry communicates critical information to our current and potential investors," Bryan Corbett, president and CEO of the Managed Funds Association in Washington, said in an emailed statement.
The advertising and solicitation rules have not been updated since 1961, except through a patchwork of interpretations and SEC guidance. In November, SEC officials proposed a principles-based approach that takes into account current market practices, technology and regulatory changes.
Groups like the Institutional Limited Partners Association and Council of Institutional Investors appreciate the proposed shift to more flexible principles-based rules, but are calling for more specific requirements for private equity funds to ensure transparency into fees, performance and other reporting measures.
"Some of the changes proposed by the commission may have a chilling effect on existing investment and operational due diligence efforts of existing and prospective investors, while others may be used as a 'shield' by private fund advisers seeking to limit, or misleadingly standardize, the information disseminated, even in response to specific or tailored requests," ILPA CEO Steve Nelson said in the group's comment letter.
One concern raised in the CII comment letter is that the proposed changes "could impair the ability of investment advisers to share certain information that investors seek, potentially reducing transparency that is essential to institutional investors in evaluating and monitoring investments."
In its comment letter, private equity advocacy group American Investment Council argued that the advertising rule proposal should not apply to private fund marketing materials.