LP lobbyist supports SEC’s proposed audit rule

The SEC should adopt the commission’s proposed audit rule, but it should also require private fund advisers to tell their investors how firms’ fees and expenses affect them individually, one of the largest LP lobbying groups says.

“In our view,” Council of Institutional Investors General Counsel Jeff Mahoney wrote in an April 7 open letter to the SEC, “the final rule should be a minimum standard and not a maximum compliance threshold. We, therefore, respectfully request the commission consider improving the final rule by requiring that private fund advisors provide pro-rata fee and expense reporting at the LP level upon request of the LP.”

CII represents 140 of the largest public and union pension funds. Its members manage nearly $4 trillion in assets. Its endorsement could be seen as a boon to SEC Chairman Gary Gensler.

Fund advisers and their advocates have criticized the proposed audit rule. They echo Republican Commissioner Hester Peirce’s argument that the proposal represents “a sea change” in how the commission regulates the industry. Gensler has argued that the new rules are needed to protect institutional investors and the ordinary people behind them.

Breaking fees and expenses down per investor “is both beneficial to understanding an individual investor’s ultimate costs and essential for those CII members that are required to provide an annual accounting of all investment costs to their own beneficiaries or governing bodies, often on a fiscal year cadence that does not align with annual reporting by the manager,” Mahoney wrote in his April 7 letter.