On August 23, 2023, the U.S. Securities and Exchange Commission (“SEC”) adopted new rules under the Investment Advisers Act of 1940 (the “Advisers Act”) that will significantly impact private fund advisers (the “Final Rules”).  Although the Final Rules abandoned most of the headline prohibitions in the SEC’s original proposal (the “Proposed Rules”) from February 10, 2022 (discussed in our Alert Memo here) —  which created shock waves through the industry for its proscriptive requirements and tone — the Final Rules still contain onerous and market practice-changing requirements.  The Final Rules do not prohibit indemnification for negligence or ban the standard practice of accounting for taxes in clawback requirements, as the Proposed Rules threatened. But they do impose substantial new and detailed quarterly reporting requirements, two prohibitions and many new disclosure requirements for side letters and expense allocations, and restrict certain other activities, which the SEC explicitly warned that Exam and Enforcement Staff will be closely reviewing. With a few limited exceptions, all registered advisers (“RIAs”) will have their hands full implementing new and modified reporting, and RIAs, exempt reporting advisers (“ERAs”) and other advisers exempt from registration must develop processes —  and make difficult judgments —  about providing preferential treatment to selected investors and engaging in the targeted activities.