SEC Crackdown On Investment Adviser Compliance Deficiencies

Introduction

The Securities and Exchange Commission (the "SEC") is cracking down on firms with compliance deficiencies under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). Although three SEC enforcement cases announced on November 28, 2011, involve extreme disregard by the particular investment adviser firms, these cases are sobering evidence of the penalties that may follow for advisers (and even for Chief Compliance Officers personally) that disregard SEC compliance.

These cases are particularly timely for advisers to hedge funds and private equity funds. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), advisers to funds of significant size will be required to be registered under the Advisers Act. All SEC-registered advisers will need to have in place appropriate compliance programs and procedures prior to March 31, 2012.