Application of the New Private Fund Adviser Rules to Offshore Advisers

On August 23, 2023, the SEC adopted five new rules applicable to private fund advisers: (1) the Quarterly Statement Rule; (2) the Private Fund Audit Rule; (3) the Adviser-Led Secondaries Rule; (4) the Restricted Activities Rule; and (5) the Preferential Treatment Rule (collectively, PFA Rules). The SEC also amended Rule 206(4)‑7 and Rule 204‑2 under the Investment Advisers Act of 1940. Although the new rules will have broad ramifications for advisers to private funds in the U.S., they also apply in certain instances to advisers whose principal office and place of business is outside of the U.S. (offshore advisers). Given the generalized guidance from the SEC in the PFA Rules, this guest article by Morgan Lewis attorneys Christine Ayako Schleppegrell, Christine Lombardo, Joshua Gurney and Ellen Weinstein explores how some of the considerable nuances in the PFA Rules may apply to offshore advisers. See our three-part series on the PFA Rules: “Overview of the New Rules and Analysis of the Restricted Activity Requirements” (Sep. 21, 2023); “Details and Obstacles of the Quarterly Reporting Requirements” (Oct. 5, 2023); and “Issues to Monitor in Preferential Treatment, Adviser-Led Transactions and Annual Audit Rules” (Oct. 19, 2023).

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