SEC eyes crackdown on hedge funds and private equity with sweeping proposal on fee disclosure

• The SEC wants private equity firms and hedge funds to increase transparency for investors.
• Under proposed rules, firms would have to share detailed quarterly disclosure reports.

The Securities and Exchange Commission is ramping up pressure on private equity firms and hedge funds to provide greater insight into fees and expenses, placing new transparency requirements on industries known for their secrecy.

In a Wednesday meeting, the regulator will propose expansive new requirements for private investment funds to provide disclosures to investors in quarterly reports. The reports are intended to prevent conflicts and protect investors.

SEC Chairman Gary Gensler has said that private funds' fees are too opaque, which can present risks to investors.

"Private fund advisers, through the funds they manage, touch so much of our economy," Gensler said in a statement. "Thus, it's worth asking whether we can promote more efficiency, competition, and transparency in this field."

Commissioners are set to vote on a proposal, and if it passes, the agency will seek public comments for at least two months before confirmation.

The update marks a significant development for private fund managers, who would for the first time have to provide statements to investors detailing fees and expenses and fund performance.

The changes would create new rules for private fund advisers on fund audits, record keeping, and adviser-led secondary transactions. They also would prevent private fund advisers from seeking reimbursement and charging various fees and expenses.

"I support this proposal because, if adopted, it would help investors in private funds on the one hand, and companies raising capital from these funds on the other," Gensler said.

Gensler in his time as SEC chief has been pushing for new rules and updates to existing regulations of a number of industries. He's been vocal about his desire to tighten the framework around crypto, in particular, pushing for lawmakers to broaden regulatory measures for exchanges.

He has said the "wild west" landscape of the crypto market will have to fall under a public policy framework over the next five to 10 years.