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New SEC Rules for Private Fund Advisers: How to Ensure Compliance and Avoid Penalties

The Securities and Exchange Commission (SEC) has recently adopted new rules that affect registered private fund advisers. These rules, which were finalized on August 23, 2023, require private fund advisers to obtain an annual financial statement audit performed by an independent certified public accounting (CPA) firm. The audit must be conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and the financial statements must be prepared in accordance with the U.S. generally accepted accounting principles (GAAP).

The new rules aim to enhance the transparency and accountability of private fund advisers, as well as to protect the interests of investors and the public. The SEC believes that an independent audit will provide assurance that the financial statements of private funds are fairly presented and free from material misstatements. The audit will also help detect and deter fraud, misappropriation, and other violations of the federal securities laws.

However, complying with the new rules may pose some challenges for private fund advisers, especially those who have not previously obtained an independent audit or who have used CPA firms that also offer investment advisory services. Many CPA firms that conduct attestation services may not be independent if they also provide non-audit services, such as valuation, due diligence, tax, or consulting, to the same clients. This may create conflicts of interest or impair the objectivity and impartiality of the auditors. Therefore, private fund advisers should carefully review their existing relationships with their CPA firms and ensure that they meet the independence requirements under the SEC rules. If not, they should seek a new CPA firm that is independent and qualified to perform the audit. The CPA firm must be a PCAOB-registered independent public accounting firm. The SEC has indicated that it will monitor compliance with the new rules and take enforcement actions against private fund advisers who fail to obtain an independent audit.

EC Barrett, LLC is a PCAOB-registered independent public accounting firm that specializes in performing examinations and audits for registered investment advisers at a cost-effective fee. We have been providing high-quality audit and assurance services for over 20 years for various industries. We have a team of dedicated professionals who are well-versed in the regulatory requirements and industry best practices. We have a proven track record of delivering timely and accurate audit reports that meet the expectations of our clients and their investors.

We understand that obtaining an independent audit may be a new and daunting process for some private fund advisers. That is why we are committed to providing personalized and responsive service. We work closely with our clients to understand their specific needs and objectives, and we tailor our audit approach accordingly. We also communicate with our clients throughout the audit process to ensure that there are no surprises or delays.

If you are a registered private fund adviser who needs to obtain an independent audit under the new SEC rules, we are here to help. We look forward to working with you regarding this matter if the need arises.

Please contact us today to schedule a consultation or request a proposal.


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