Bailey McCann, Opalesque New York:
The US Securities and Exchange Commission (SEC) is creating a new squad to investigate private funds managers. SEC examiners will be looking at how hedge funds communicate to their clients, value assets and provide disclosures. The group appears to have emerged after lackluster results from recent presence exams spurred on by Dodd-Frank rules.
The SEC will be bringing on more specialist examiners to focus on valuations for hedge funds with level 3 assets - assets which are typically harder to value. The regulator has also made a budget request to bring on some 300 new staffers to handle examinations.
According to a Wall Street Journal report on the matter, newly registered advisors can expect to see an exam. The regulator has set a target of examining 15-25% of new registrants within the next two to three years. Opalesque previously reported that one third of firms examined by the SEC so far failed on questions of custody. Presence exams may not directly link to administrative actions if a fund does poorly, but may result in an extended examination or other form of settlement to resolve compliance issues.
To view our full article Click here