boltKey takeaways
- Compliance obligations step up in stages, from exempt reporting adviser to state or SEC registration and then Form PF filer, so plan the next stage before you reach it.
- A registered adviser needs written policies reasonably designed to prevent violations, a chief compliance officer, and a documented annual review, under Rule 206(4)-7.
- Most private equity exam findings trace back to fees and expenses, conflicts, valuation and marketing. Build controls there first.
- The 2023 Private Fund Adviser Rules were vacated, but fee and expense disclosure, fair allocation and fiduciary duty are still enforced under existing law.
- A single compliance calendar with owners, evidence and an audit trail turns compliance from scattered reminders into a system you can show an examiner.
Private equity compliance is the set of policies, controls, filings and records that keep a fund manager within securities law, its fiduciary duty and its fund documents. For a registered adviser, the core requirement is a written compliance program reasonably designed to prevent violations of the Advisers Act, administered by a chief compliance officer and reviewed at least annually. The skill is sizing that program to the firm's stage and its real risks, so it grows with the business instead of being rebuilt every time the firm crosses a threshold.
This guide sets out a framework: where obligations come from, how they change as a firm grows, which risk areas deserve the most attention, and how to run the program day to day.
Compliance grows in stages#
A manager's obligations depend on its regulatory status, and that status changes as assets and fund types change.
| Stage | Typical profile | Main obligations |
|---|---|---|
| Exempt reporting adviser (ERA) | Venture-only manager, or a manager with less than $150M of U.S. private fund assets | Abbreviated Form ADV, antifraud rules, pay-to-play rule, recordkeeping as required, state rules where applicable |
| State-registered adviser | Smaller adviser below the SEC threshold, where the home state requires registration | State registration, state rules on custody, books and records, and advertising |
| SEC-registered adviser | Above the SEC registration thresholds, or no exemption available | Full Form ADV with Part 2 brochure, compliance program and CCO, code of ethics, custody rule, marketing rule, SEC exams |
| Registered adviser and Form PF filer | At least $150M of private fund assets | All of the above plus Form PF |
| Large private equity adviser for Form PF purposes | At least $2B of private equity fund assets | Expanded Form PF sections |
The transition from ERA to registered investment adviser is where most firms struggle. Once an adviser no longer qualifies for an exemption, the Advisers Act generally gives it a limited window to register, and the full program must be in place on the effective date. Start building it about a year before you expect to cross the line.
The core program for a registered adviser#
Rule 206(4)-7 requires registered advisers to:
- adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act
- review them at least annually for adequacy and effectiveness
- designate a chief compliance officer who is competent, knowledgeable and empowered
Beyond that rule, a typical private equity program includes:
- Code of ethics (Rule 204A-1): personal trading pre-clearance, quarterly transaction reports and annual holdings reports from access persons, and gift and entertainment rules
- Books and records (Rule 204-2): required records, retained for the required period, including electronic communications
- Custody (Rule 206(4)-2): for pooled funds, usually met by an annual audit by a PCAOB-registered and inspected accountant, with audited financials delivered to investors within 120 days of fiscal year-end (longer for funds of funds)
- Marketing (Rule 206(4)-1): substantiation of performance, net-of-fees presentation, testimonials and endorsements, and hypothetical performance controls
- Privacy and data protection (Regulation S-P): the 2024 amendments require an incident response program, service provider oversight and customer notification of certain breaches. They now apply to all covered advisers, since the compliance dates of December 2025 and June 2026 have passed
- Material non-public information: information barriers, watch lists and restricted lists, which matter for funds with board seats or public positions
- Pay-to-play (Rule 206(4)-5): political contribution pre-clearance for covered associates, which applies to ERAs as well
- Business continuity and cybersecurity
Where private equity risk concentrates#
SEC examinations of private fund advisers keep returning to a small set of themes. Build controls in proportion to them.
Fees and expenses#
The single most common problem area. Typical issues:
- charging expenses to the fund that the LPA allocates to the manager
- miscalculating management fee offsets for portfolio company fees
- applying the wrong fee basis after the investment period, or failing to step down the fee on write-downs or dispositions
A practical control is a quarterly fee and expense review. Tie each category of fund expense to the LPA clause that permits it, and recompute management fees independently of the person who prepared them.
Conflicts of interest#
Co-investment allocation, cross-fund transactions, GP-led secondaries, related-party service providers and allocation of broken-deal expenses all create conflicts. Disclosure must be specific and timely, and the actual practice has to match the disclosure.
Valuation#
Marks drive reported performance, fees (where fees are based on NAV) and fundraising. Examiners look for a written valuation policy that is actually followed, consistent methodology, and documentation of the judgments made.
Marketing and performance#
Track records presented in fundraising materials must be substantiated, shown net of fees alongside gross, and consistent with how the firm calculates performance elsewhere.
Private Fund Adviser Rules: what remains after vacatur#
In August 2023 the SEC adopted rules requiring quarterly statements, annual audits, fairness opinions for adviser-led secondaries, and restrictions on certain fee and expense practices and preferential treatment. In June 2024 the Fifth Circuit vacated the entire package. As of late 2026, none of it is in force. See Private Fund Adviser Rules.
What remains is the existing law the rules sought to codify:
- Fiduciary duty under Section 206, including full and fair disclosure of conflicts
- Rule 206(4)-8, which prohibits misleading statements to investors and prospective investors in pooled vehicles
- Enforcement for undisclosed fees, inaccurate expense allocations and misleading preferential terms
Many LPs also now ask for quarterly reporting in ILPA-style formats and for side letter disclosure as a matter of contract, whatever the regulatory status.
Running the program: a compliance calendar#
Most compliance failures are timing failures: a filing missed, a review never documented. A shared calendar with an owner and evidence for each item fixes most of them. Here is a sample for a registered PE adviser with a December fiscal year-end. These are common deadlines, so adjust for your own facts:
| Timing | Item |
|---|---|
| Within 30 days of quarter-end | Access persons submit code of ethics quarterly transaction reports, then the CCO reviews them |
| By March 31 | Form ADV annual updating amendment, and brochure delivery to clients within 120 days of fiscal year-end |
| By April 30 | Audited fund financials delivered to LPs (custody rule audit approach) |
| Within 60 days of quarter-end | Form PF private equity event reports, such as adviser-led secondaries or GP removal, when a reportable event occurred |
| Annually | Form PF annual filing for smaller private fund advisers, within 120 days of fiscal year-end |
| Annually | Compliance program annual review documented, and code of ethics holdings reports collected |
| Annually | Form D amendment for any offering that is still continuing |
| Ongoing | OFAC screening, personal trading pre-clearance, marketing review, pay-to-play pre-clearance |
The annual review deserves particular care. Document what you tested, how, what you found and what you changed. An annual review memo that says "no issues identified", with no testing evidence behind it, is a frequent exam observation.
A hypothetical sizing example#
Assume a manager with two private equity funds totaling $600M of private fund assets and 14 staff:
- It is above the $150M private fund adviser exemption and therefore SEC-registered.
- It files Form PF annually as a smaller private fund adviser, since it is well below the $2B large PE adviser threshold. It must still file event reports within 60 days of quarter-end if a specified private equity event occurs, such as an adviser-led secondary.
- A part-time CCO with outsourced support is common at this size. The key requirement is that the CCO has authority and time, not just a title.
- Highest-risk areas: fee offsets from portfolio company monitoring fees, co-investment allocation, and valuation of a few illiquid positions. The annual review tests these first.
Watch list: changes in flight#
Several items may change the program in 2027 and 2028:
- Form PF. The compliance date for the 2024 amendments has been pushed back repeatedly. Law-firm reports put it at July 1, 2027, while the SEC considers an April 2026 proposal to revise those amendments.
- AML. FinCEN's investment adviser AML rule now takes effect January 1, 2028, and its scope may be narrowed. See AML and KYC.
- Beneficial ownership. U.S. entities no longer file under the Corporate Transparency Act. Only certain foreign registered entities do. See Corporate Transparency Act.
How Privatis helps#
Privatis gives compliance teams a filings calendar tied to each adviser and fund entity, management fee calculation with a double-entry general ledger behind it, KYC/AML onboarding with risk scoring, side letter and MFN election tracking, and DDQ response management. Every change is recorded in an audit trail, so the evidence behind a filing, a fee calculation or an investor approval is ready when the annual review or an examiner asks for it.
This framework is general. Confirm your firm's specific obligations with compliance counsel.