While the findings are not new or surprising, they do serve as a reminder of the regulator’s focus on advisers’ fiduciary and supervisory duties.
On June 23, 2020, the Securities and Exchange Commission’s (SEC’s) Office of Compliance Inspections and Examinations (OCIE) published a Risk Alert describing various compliance deficiencies observed in recent examinations of registered investment advisers that manage private equity funds or hedge funds (collectively, private funds).
OCIE highlighted compliance deficiencies in three particular areas, aligned with the areas of concern for private funds previously noted by OCIE its 2020 Examination Priorities: (1) conflicts of interest; (2) fees and expenses; and (3) controls related to material non-public information (MNPI).
This Client Alert summarizes the SEC’s findings and concerns, and serves as a framework against which all private fund managers and advisers can self-assess and benchmark against good industry practice. The Alert also includes an Appendix containing a practical compliance checklist to assist with this exercise.