On June 23, 2020, the SEC Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert [1] that highlights commonly encountered deficiencies in examinations of hedge fund managers and private equity fund sponsors.
At the outset, the Risk Alert connects its observations with respect to private investment funds with the current Commission’s repeated focus on retail investors, noting that private funds “frequently have significant investments from pensions, charities, endowments and families.” Indeed, the Risk Alert is described as not only useful information for advisers to private funds; it is offered “to provide investors with information concerning private fund adviser deficiencies.”
While the Risk Alert does not establish new standards of conduct, it does provide a concise summary of three categories of deficiencies the examination staff stated that it finds in its reviews of advisers to private funds. These findings are consistent with what we have observed on examination of private fund advisers.
