Feb 28, 2024 | News

Preparing for the RIA Audit under new SEC Private Fund Rule

Effective November 13, 2023, Rule 206(4)-10 mandates Registered Investment Advisors (RIAs) to obtain an annually certified audit for any private fund under their management and promptly deliver it to investors.

The audit must be concluded and distributed within 120 days of the private fund’s fiscal year-end, as well as upon liquidation.

The Securities and Exchange Commission (SEC) enacted this measure to ensure an independent validation of a fund’s financial statements, thereby guaranteeing an accurate representation of the fund’s performance and financial standing. Additionally, the SEC emphasized that these independent audits would fortify investor protection by providing transparency regarding the value of fund assets, often characterized by lack of liquidity.  It is critical to choose an auditor with the right credentials.

Requirements for Auditors:

  • Independence: Auditors must maintain a complete absence of financial, managerial, or any other relationship with the private fund that could present a conflict of interest.
  • Proficiency in U.S. GAAP or IFRS.
  • Compliance with PCAOB Standards: Auditors must be registered with the Public Company Accounting Oversight Board and subject to its regulatory scrutiny.
  • Disclosure and Reporting Obligations: Auditors are pivotal in ensuring RIAs accurately disclose and report information under Form PF (Private Fund Reporting Form).

The compliance deadline for the new SEC Private Fund Advisor Rule is either September 14, 2024, or March 14, 2025, contingent upon the size of the Investment Advisor. It is advisable to consult with your attorney to determine when your RIA must undergo the private funds audit and distribute the reports.

At Michael Coglianese CPA, P.C., we recognize the significance of proactive audit preparation. Being adequately prepared streamlines the process, thereby reducing audit duration and associated costs. We are extending a complimentary 30 minute consultation to aid in organizing and preparing financial information. Please schedule your consultation via the provided link below. Additionally, we can facilitate connections with RIA Consulting groups and specialized fund administrators tailored to private funds.

Free Audit Consultation