Private funds were a major focus of the US Securities and Exchange Commission’s (SEC’s or Commission’s) enforcement and rulemaking programs in 2022, and we expect 2023 to be even more active. The Division of Examinations’ 2023 Exam Priorities, released on February 7, 2023, highlight the inspection, examination, and regulation of registered investment advisers as a “Notable New and Significant Focus Area,” promising increased attention from the Division of Examinations and the SEC’s Regional Offices in 2023.

One legacy of 2022 will be the market turbulence that affected both traditional and new investment products, which can be expected to heighten the SEC’s resolve to regulate private funds more heavily in 2023. Indeed, even before the collapse of crypto trading platform FTX Trading Ltd. (FTX) and its affiliated hedge fund in December 2022, the SEC was moving to require enhanced disclosure for private funds that invest in new and innovative investment products. The FTX matter will only increase pressure on the SEC to move forward on those efforts.