In a development which has been apprehensively anticipated, new rules and amendments were adopted by the U.S. Securities and Exchange Commission (SEC) on August 23, 2023 under the Investment Advisers Act of 1940. Referred to as the Private Fund Adviser Rules or simply, the Rules, these changes are expected to have a significant impact on advisers to private funds.
However, in a scintilla of relief for advisers located outside the United States, often referred to as ‘offshore advisers’, the SEC, in its Adopting Release, clarified that the Rules would, in most cases, not apply. The SEC stated, “in a welcome development…the SEC confirmed in its Adopting Release that in most cases the Rules would not apply to advisers located outside of the U.S.”
This crucial announcement puts to rest numerous ongoing concerns and speculations that have been circulating within the international legal and investment advisory community regarding the potential extraterritorial scope of the Private Fund Adviser Rules. While what constitutes being ‘situated outside the US’ for the purposes of this exemption remains a particular grey area, this step taken by the SEC provides at least some respite for offshore advisers. Nevertheless, certain queries still persist and further elucidation on this matter will be keenly awaited by the global legal fraternity.
Even as this news article is being written, legal experts from across the world, particularly non-U.S. investment advisers, are delving into the fine print of these new Rules for a clear understanding of their implications. It would be prudent for anyone involved in this sphere, particularly those residing outside the U.S., to remain astutely aware of the evolving legal landscape.