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Aaron Schlaphoff Discusses Uncertainty Surrounding New SEC Marketing Rule for Fund Managers in FundFire

September 21, 2022

Corporate partner Aaron Schlaphoff was extensively quoted in a FundFire article on the ways in which private fund managers are grappling with the Securities and Exchange Commission’s new marketing rule, which takes effect on November 4. In the article, “Managers Still Making ‘Last Minute’ Calls on New SEC Marketing Rule,” published on September 21, Aaron highlights private fund managers’ uncertainty around how to comply with a specific mandate that requires reporting of both gross and net performance for limited partners, or LPs. He notes that the requirements don’t neatly fit how private funds currently do business.

“There’s not really a good way of calculating LP net-level performance,” he says. He also expects that “quite a few firms will make a decision at the last minute,” as they troubleshoot ways to align their returns data with the new SEC framework without inadvertently providing “misleading” data.

“There’s not a clear answer to any of this,” Aaron adds. “People are struggling with trying to come into compliance by Nov. 4 without any additional guidance from the SEC. It’s a situation where two different firms could reasonably take very different views.”

Aaron recommends that private fund managers need to start their compliance preparations now, especially firms currently raising capital. He also emphasizes to clients that “whatever decisions you make on this and a raft of other questions, document it and your reasons and be as consistent as possible.”

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