boltKey takeaways
- The SEC adopted the Private Fund Adviser Rules in August 2023, and the Fifth Circuit vacated the entire package on June 5, 2024, before any private-fund-specific requirement reached its compliance date.
- The SEC did not seek rehearing or Supreme Court review, and in November 2024 it removed the vacated rule text from the Code of Federal Regulations.
- The written-documentation amendment to the compliance rule was part of the same release and was vacated as well, though documenting the annual review remains sound practice.
- Fiduciary duty, the antifraud provisions, the custody, marketing and compliance rules, and Form PF event reporting still apply, so undisclosed fees, unfair expense allocation and hidden preferential terms remain enforcement risks.
- Much of what the rules would have mandated, such as quarterly fee reporting and side letter disclosure, is now driven by LP demands and side letters rather than regulation.
The SEC's Private Fund Adviser Rules were a package of requirements adopted in August 2023 that would have mandated quarterly fee and performance statements, annual fund audits, fairness opinions for adviser-led secondaries, and limits on certain fees, expenses and preferential terms. They never took effect: on June 5, 2024, the U.S. Court of Appeals for the Fifth Circuit vacated the rules in their entirety, and the SEC let the decision stand. Private fund advisers are still bound by the pre-existing framework of fiduciary duty, antifraud rules and disclosure obligations, which covers much of the same conduct.
What the SEC adopted in 2023#
The rules were adopted on August 23, 2023, in a release titled "Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews." They had five main parts, plus a change to the existing compliance rule.
| Rule | What it would have required | Who it covered |
|---|---|---|
| Quarterly statement rule | Standardized quarterly statements to investors showing fund fees, expenses, adviser compensation, offsets and performance | SEC-registered advisers |
| Audit rule | An annual financial statement audit of each private fund, meeting custody rule standards | SEC-registered advisers |
| Adviser-led secondaries rule | A fairness opinion or valuation opinion from an independent provider, plus disclosure of material business relationships, before closing an adviser-led secondary | SEC-registered advisers |
| Restricted activities rule | Limits, subject to disclosure or investor consent, on charging certain investigation and regulatory costs to funds, reducing GP clawbacks for taxes, non-pro-rata expense allocation and borrowing from a fund | All private fund advisers, including unregistered |
| Preferential treatment rule | A ban on certain preferential redemption and information rights that would materially harm other investors, plus disclosure of all other preferential treatment | All private fund advisers, including unregistered |
| Compliance rule amendment | Written documentation of each annual compliance program review | All SEC-registered advisers |
Compliance dates were staggered by adviser size and ran into 2025 and 2026. The documentation amendment to the compliance rule took effect in late 2023, but none of the private-fund-specific rules reached its compliance date before the court ruled.
Why the Fifth Circuit vacated them#
A group of private fund industry trade associations led by the National Association of Private Fund Managers petitioned for review shortly after adoption. In National Association of Private Fund Managers v. SEC (No. 23-60471), the court held that the SEC had exceeded its statutory authority:
- Section 211(h) of the Advisers Act, added by Dodd-Frank, was read as addressing retail customers, not private funds and their investors.
- Section 206(4), the antifraud rulemaking authority, requires the SEC to define the fraudulent practices it is targeting and to adopt rules reasonably designed to prevent them. The court found the SEC had not done so.
Because the court vacated the rules in full, the compliance rule documentation amendment fell with them. The SEC did not request rehearing, and the window to seek Supreme Court review closed in September 2024. In November 2024 the SEC published technical amendments removing the vacated provisions from the Code of Federal Regulations. Since then the SEC's agenda has moved in a deregulatory direction: in June 2025 it withdrew a set of other pending adviser proposals, including the safeguarding proposal that would have rewritten the custody rule, and in April 2026 it proposed scaling back Form PF.
What still applies#
The vacatur removed the bright-line requirements. It did not change the obligations that existed before 2023, and those continue to reach most of the same conduct.
Fiduciary duty and antifraud#
Every investment adviser, registered or not, owes its clients a fiduciary duty of care and loyalty. Section 206 of the Advisers Act prohibits fraud on clients, and Rule 206(4)-8 specifically prohibits misleading statements to investors and prospective investors in pooled vehicles. Charging a fund fees or expenses not authorized by the limited partnership agreement, allocating shared expenses unfairly between a fund and co-investors, or failing to disclose conflicts remain classic enforcement theories. None of this depends on the vacated rules.
Registered adviser rules#
SEC-registered advisers remain subject to the compliance rule (written policies and procedures, a chief compliance officer, and an annual review), the custody rule (which most private fund advisers satisfy by having funds audited annually and distributing audited financials to investors), the marketing rule (including its requirements for presenting performance), the code of ethics rule and the books-and-records rule. In practice, the custody rule means most registered advisers' funds were already audited before the audit rule existed. See our guide to the registered investment adviser framework for the full list.
Form PF event reporting#
Separately, the May 2023 Form PF amendments require private equity fund advisers that file Form PF to report adviser-led secondary transactions, GP removals and early terminations within 60 days after the quarter in which they occur. Those requirements were not part of the vacated release and remain in force as of late 2026, although an April 2026 SEC and CFTC proposal would eliminate them. See our Form PF guide for details.
Where the substance went: LP terms and market practice#
Several features of the vacated rules have migrated into commercial terms rather than disappearing:
- Fee and expense transparency. Many institutional LPs request quarterly fee, expense and carried interest reporting in a standardized template as a side letter condition or as part of due diligence.
- Side letter disclosure. Most-favored-nation clauses give investors the right to see, and often elect, terms granted to others. Clean side letter tracking reduces the risk that a preferential term goes undisclosed.
- Continuation vehicles. Fairness opinions in adviser-led secondaries are now common as a matter of market practice and LP advisory committee expectations, even though no rule requires them.
- Audits. Annual audits remain near-universal because of the custody rule and LP requirements.
A practical checklist for GPs and fund CFOs#
Without a prescriptive rule, the burden shifts to showing that what you did was disclosed, authorized and fair. Five steps cover most of the exposure:
- Map every fee and expense category to the governing document clause that authorizes it. Anything without a clear hook should not be charged to the fund.
- Write and follow an expense allocation policy for shared costs among funds, co-investment vehicles and the management company, and keep evidence of how each allocation was calculated.
- Maintain a single register of side letter terms and MFN elections, and reconcile it to what was disclosed to other investors.
- Document conflict reviews for adviser-led secondaries, cross-fund transactions and affiliated service providers, including LP advisory committee consents.
- Document the annual compliance review in writing anyway. The requirement was vacated, but SEC examiners still ask how the review was performed.
For the broader program these steps sit within, see our private equity compliance framework and our overview of management fees, where offset and expense questions most often arise.
How Privatis helps#
Privatis supports the disclosure-based approach that now governs this area. Side letter and MFN election tracking keeps preferential terms in one register. The fund general ledger and management fee calculations show exactly what was charged to each fund and why, with an audit trail of every change. ILPA-style investor reporting templates and the LP portal give investors consistent fee, expense and capital account information each quarter, and the compliance filings calendar tracks Form PF and other recurring obligations.
The regulatory landscape for private fund advisers can shift with new rulemaking or enforcement priorities, so confirm your obligations with counsel.