Adviser-Led Secondaries

Adviser-led secondary transactions have seen explosive growth over the last five years.  That growth has brought increased regulatory concerns over the conflicts of interests inherent in these transactions and a perceived lack of transparency into this market.  New SEC rules adopted in 2023 will arm regulators with additional tools to identify, exam and investigate market practices.  It is therefore critical for managers running an adviser-led secondary transaction to not only comply with the new rules as they become effective but to structure any such transaction with the SEC’s concerns in mind. 

To understand the litigation and regulatory risks that are coming in 2024 for private capital, it is helpful to look back briefly on recent events. Arguably, the single most important event over the last 18 months was the rapid increase in interest rates by the central banks in the United States, England, and Europe. From March 2022 to August 2023, the Federal Reserve increased interest rates at the fastest clip in more than 40 years, to break inflation that had reached the highest levels since the 1970s.

On February 9, 2022, the U.S. Securities and Exchange Commission (the “SEC”) proposed new rules and amendments to existing rules under the U.S. Investment Advisers Act of 1940, as amended, that would have notable practical implications for private funds advisers, in many cases regardless of the adviser’s registration status. At

On February 9, 2022, the U.S. Securities and Exchange Commission (the “SEC”) proposed new rules and amendments to existing rules under the U.S. Investment Advisers Act of 1940 that would have notable practical implications for private fund advisers, in many cases regardless of the adviser’s registration status. The Proposed Rules