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Alternative Market Briefing

SEC's 2025 Examination Priorities - What Hedge Funds Need to Know

Tuesday, October 22, 2024

Matthias Knab, Opalesque for New Managers:

The U.S. Securities and Exchange Commission's Division of Examinations has released its priorities for the 2025 fiscal year. Here's what hedge fund managers should be focusing on:

1. Fiduciary Duty and Compliance Programs

The SEC continues to prioritize examining advisers' adherence to their fiduciary duty. Key areas of focus include:

  • Investment advice regarding high-cost products, unconventional instruments, and illiquid assets
  • Disclosure and mitigation of conflicts of interest
  • Fee calculations and related disclosures
  • Effectiveness of compliance programs, especially in areas like marketing, valuation, trading, and portfolio management
2. Private Fund Advisers

Specific areas of scrutiny for private fund advisers include:

  • Consistency between disclosures and actual practices, especially during market volatility
  • Accuracy of fee and expense calculations and allocations
  • Disclosure of conflicts of interest and risks
  • Compliance with new SEC rules, including amendments to Form PF and updated marketing rules
3. Emerging Technologies and Cybersecurity

The SEC is paying close attention to the use of new technologies:

  • Use of AI, including for fraud prevention, ba......................

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