On September 14, 2021, U.S. Securities and Exchange Commission Chair Gary Gensler testified before the Senate Committee on Banking, Housing, and Urban Affairs. During his testimony, he stated that the SEC is exploring “potential reforms” regarding investment funds and managers.  Chair Gensler explained that one of the potential reforms under consideration by the SEC was ways to enhance disclosures by private fund managers regarding conflicts of interest and allocation of fees and expenses. He stated that he believed the SEC could “enhance disclosures in this area, better enabling pensions and others investing in these private funds to get the information they need to make investment decisions” and that “[u]ltimately, every pension fund investing in these private funds would benefit if there were greater transparency and competition in this space.”

Although apparently driven by concerns relating to pension fund investors, Chair Gensler did not provide any details regarding the potential reforms under consideration. The SEC has brought a number of enforcement actions against fund managers in prior years alleging failure to disclose various conflicts of interest and inadequate fee/expense disclosure under general fiduciary principals. The SEC may now be considering more proscriptive disclosure requirements.

In House testimony given earlier this year, Gensler noted the significant growth in private funds and private fund assets over the past five years.  Given these changes, he had requested staff recommendations regarding potential enhanced reporting and disclosure through Form ADV, Form PF, or other possible reforms.