Meeting Transparency Demands After the SEC’s Private Funds Rule Reversal

The SEC’s Private Funds rule was vacated by the United States Court of Appeals for the Fifth Circuit. Despite this, private equity managers must still meet investor demands for transparency. They should reevaluate practices, adjust operational procedures, and enhance disclosures as necessary.

Lionpoint (an Alpha Group company) remains equipped to assist in navigating these challenges, offering expertise in both systems management and investor transparency.

What does this mean for private fund advisers?

Although the SEC’s rules were vacated, ILPA intends to update its quarterly reporting template. This may heighten transparency expectations from investors. Anticipate future regulations that will likely increase responsibilities and administrative burdens for registered and exempt private fund advisers.

Consequently, several systems and processes within private equity funds and fund administrators may need to
be updated, including:

• Investor Onboarding: Digitize the investor onboarding process with electronic subscription documents, digital signatures, and seamless integration with the CRM system.

• Data Management: Implement a centralized data management platform that integrates data from various sources, ensuring consistent and accurate data flow throughout the fund’s operations. Utilize CRM systems to manage investor relationships and track communications.

• Expense Management and Allocation: Implement a solution that systematically captures, tags, and allocates organizational and operational expenses. The solution should feature vendor management, dynamic approval workflows, expense passthrough policy configuration, automated expense allocations, chargeback invoicing, and seamless integration with third-party systems such as fund and management company accounting systems. In addition to enhancing visibility into business spending and streamlining the NAV close process, these capabilities ensure GP’s adherence to partnership agreement policies and facilitate the expense disclosures required by investors.

• Partnership Accounting Systems: Upgrade partnership accounting systems to handle financial processes, such as management fee calculations, allocations, and distributions, while ensuring accurate disclosure of fund performance and fees.

• Valuation and Audit: Streamline the valuation process with digital tools and platforms that automate data collection, validation, and reporting, enhancing the accuracy and efficiency of periodic financial audits. Compliance and Risk Management: Implement automated compliance checks and risk management tools to monitor restricted activities, generate compliance review documentation, and ensure adherence to regulatory requirements.

• Compliance and Risk Management: Implement automated compliance checks and risk management tools to monitor restricted activities, generate compliance review documentation, and ensure adherence to regulatory requirements.

• Investor Reporting: Generate and distribute customized investor reports with specific disclosures, performance metrics, and fee calculations through a secure digital investor portal.

• Continuous Improvement: Regularly review and optimize digital processes, leveraging data analytics and insights to make data-driven decisions and enhance operational efficiency.

How can Lionpoint help?

Lionpoint offers tailored solutions to enhance transparency and reporting. Our team of subject matter experts provides actionable solutions and services to address your requirements.

Contact your Lionpoint consultant today for improved transparency through enhanced reporting practices. For information on our assessment process, please email info@lionpointgroup.com.

Are you prepared?

Download our checklist of interdependencies below to ensure data systems and processes are well aligned.