The Office of Compliance Inspections and Examinations’ (OCIE) June 23, 2020, Risk Alert focuses on three areas where OCIE has observed compliance deficiencies during recent examinations of registered investment advisers (RIAs) that manage private equity funds or hedge funds (collectively, “private fund advisers”): conflicts of interest, fees and expenses, and policies and procedures relating to material non-public information (MNPI). While the Risk Alert was issued by OCIE, it is a good indicator of the sorts of matters that are likely to trigger future investigations and enforcement actions by the Division of Enforcement. OCIE specifically noted that even though the Securities and Exchange Commission (SEC) has already brought enforcement actions based on a number of issues discussed in the Risk Alert, it “continues to observe some of these practices during examinations.” OCIE likely intended this statement to be a warning to RIAs that both OCIE and the Division of Enforcement are likely to take a harder line when confronted with perceived compliance failures in these areas going forward.
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