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ARTICLE · 03 FEBRUARY 2022

Observations From Examinations Of Private Fund Advisers

Foley & Lardner LLP
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On June 23, 2020, the U.S. Securities and Exchange Commission (SEC) Division of Examinations (EXAMS) issued a risk alert based on 5 years of examinations of registered investment advisers that manage...

United StatesFinance and Banking
Stuart Fross
Stuart Fross
Leslie A. Pinney
Leslie A. Pinney
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On June 23, 2020, the U.S. Securities and Exchange Commission (SEC) Division of Examinations (EXAMS) issued a risk alert based on 5 years of examinations of registered investment advisers that manage private equity funds or hedge funds (collectively "private fund advisers").1  On January 27, 2022, the EXAMS staff issued a follow up report detailing additional compliance issue observations: (A) failure to act consistently with disclosures; (B) use of misleading disclosures regarding performance and marketing (C) due diligence failures relating to investments or service providers; and (D) use of potentially misleading "hedge clauses."

A. Conduct Inconsistent with Disclosures: The EXAMS staff highlighted six situations where they find the conduct of private fund advisers regularly do not live up to their disclosures. These are:

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