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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United States | Publication | May 2023
On May 3, 2023, the US Securities and Exchange Commission (SEC) officially announced the adoption of new amendments enhancing disclosure requirements for private funds.
The amendments were originally proposed on January 26, 2022, and have been adopted with several modifications in light of the many comments received on the proposal. The amendments are designed to “enhance the ability of the Financial Stability Oversight Council (FSOC) to assess systemic risk and to bolster the Commission’s oversight of private fund advisers and its investor protection efforts.”
As we previously discussed in our legal update, US SEC amendments seek more disclosures from private equity and hedge funds, which regards the proposed amendments and how they would increase disclosure requirements, the proposed amendments—and their subsequent adoption—primarily concern changes to Form PF and follow the SEC announcement that it will more closely scrutinize the transaction costs and fees charged by private equity and hedge funds.
Regarding the adopted amendments, SEC Chair Gary Gensler explained, “Private funds today are ever more interconnected with our broader capital markets. They also nearly have tripled in size in the last decade. This makes visibility into these funds ever more important. Today’s amendments to Form PF will enhance visibility into private funds and help protect investors and promote financial stability.”
Primarily, the amendments will require large hedge fund advisers and all private equity fund advisers to file current reports upon the occurrence of certain reporting events that could indicate significant stress at a fund or investor harm.
More specifically, the reporting requirements for private equity fund advisers are modified by the adopted amendments in the following manner:
Some major deviations from the proposed amendments are as follows:
The amendments for current reporting will become effective in November 2023, and the remaining amendments will become effective in May 2024.
This announcement and the adopted amendments should signal to private equity and hedge funds that the SEC remains focused on their conduct; and private funds should start or continue taking proactive measures to ensure compliance with the new requirements stemming from these efforts.
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Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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On February 2, 2024, the Belgian Presidency of the Council of the European Union confirmed that the Committee of Permanent Representatives had signed the Artificial Intelligence (AI) Regulation, referred to as the AI Act. Approval by the EU Parliament followed on 13 March 2024, and the AI Act is likely to appear in the EU’s Official Journal around May 2024. The AI Act aims to establish a stringent legal framework governing the development, marketing, and utilisation of artificial intelligence within the region, thereby marking a significant advancement in the regulation of this burgeoning domain.
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The private credit market and direct lending have grown and diversified immensely in the past decade, offering alternative sources and terms of debt compared to those historically provided by the syndicated leveraged loan and public issuance markets. Consequently, they are fast becoming pivotal components in the capital ecosystem, so much so that the Bank of England consider that the private credit market is currently responsible for approximately $1.8 trillion of debt issuance, which is four times its size in 2015. This growth has been particularly pronounced in Europe and the US but there has also been significant activity in Asia.
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