This VC Lab summary breaks down the SEC's August 23, 2023 Private Fund Adviser rule into what passed and what failed. Transparency measures passed: side letters granting preferential terms must be disclosed to other Limited Partners, information given to one LP must be shared equally with all, and larger conflicts of interest require full LP approval rather than sign off from an LPAC alone. Fairness measures passed in a watered down form, restricting side letter terms and certain fees, while proposed ethics and accountability changes, removing fiduciary duty waivers and raising liability from gross negligence to negligence, both failed. Registered advisers must now provide quarterly reports and undergo annual audits, and funds under $1.5 billion get an 18 month transition period.

Fund managers get a clear, non-legalese breakdown of a rule that directly changes how they can structure Limited Partner relationships, at a moment when the full regulatory text runs to hundreds of pages of dense federal rulemaking language and cross-references scattered throughout the entire ruling itself and its exhibits. The passed versus failed framing is especially useful because it separates what funds must actually comply with, such as side letter disclosure, from proposals that generated controversy but did not become binding, such as the negligence standard change. The included hypothetical case study of a fund with legacy preferential side letters gives managers a concrete way to think through their own disclosure exposure, rather than interpreting the SEC's dense fact sheet unaided.