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By: Susan Gault-Brown, Kelley A. Howes, Leonora Shalet, Stephanie Thomas; Morrison and Forrester
On June 23, 2020, the SEC's Office of Compliance Inspections and Examinations published a Risk Alert identifying common deficiencies and compliance issues it has observed in examinations of registered investment advisers that manage private equity funds or hedge funds. Among other things, OCIE noted that these deficiencies may have caused investors in private funds to pay more in fees and expenses than they otherwise might have.
OCIE divides the issues into the following broad categories, which are addressed below:
1. inadequate disclosure relating to conflicts of interest;
2. fees and expenses; and
3. policies and procedures relating to material non-public information ("MNPI").
Conflicts of Interest
Conflicts have been an area of focus for the Commission for a number of years, and they were addressed in detail in the Commission's interpretive release last year that clarified the standard of conduct applicable to investment advisers. Central to that standard of conduct is the obligation of an investment adviser to mitigate and, so far as practicable, eliminate conflicts of interest between the adviser and its clients. In order to meet that standard, an adviser should seek to make full and fair disclosure of conflicts of interest in fund documents, the adviser's Form ADV, and otherwise.
In the Risk Alert, OCIE identified nine circumstances where conf...................... To view our full article Click here
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