Mon, Jun 29, 2020
On June 23, 2020, the Security and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) published a risk alert regarding certain compliance issues observed in examinations of registered investment advisers that manage private equity funds or hedge funds (collectively, “private fund advisers”). The deficiencies observed by staff were related to Sections 206 and 204A of the Investment Advisers Act of 1940. This risk alert was issued to encourage private fund advisers to review their practices, policies and procedures related to implementation, conflicts of interest, fees and expenses, as well as policies and procedures for material non-public information (MNPI) discussed below.
OCIE staff observed that private fund advisers failed to adequately disclose a number of conflicts of interest including conflicts related to the following:
In addition, OCIE staff observed deficiencies involving fee and expenses, including the following:
OCIE staff observed instances in which private fund advisers did not adequately address risks posed by employees, including the following:
OCIE staff also observed deficiencies related to private fund advisers’ enforcement of code of ethics provisions related to the following:
The private fund adviser issues identified above resulted in a range of actions, including no comment letters, deficiency letters and, where appropriate, referrals to the Division of Enforcement.
For further information and examples related to the private fund advisers compliance issues identified, you can find the entire report here.
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With expertise in diverse regulatory frameworks, including the FCA, the SEC, AMF, SFC, MAS and more, Kroll offers practical support, from initial authorization to ongoing compliance support.