Recent OCIE Risk Alert Demonstrates SEC’s Continued Focus on Private Fund Advisers

The staff (the “Staff”) of the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (“OCIE”) recently issued a Risk Alert focused on certain key compliance issues for registered investment advisers that manage private equity funds or hedge funds (collectively, “private fund advisers”). OCIE’s Risk Alert highlights certain common deficiencies the Staff has observed, and its publication demonstrates the Staff’s continued focus on regulating private fund advisers. For purposes of this Cannabis Business Advisory blog, private fund advisers and investors alike in the cannabis space are advised to carefully take note of this Risk Alert, especially given the already enhanced scrutiny of the industry.

The Staff emphasizes three general areas of deficiencies OCIE has identified in examinations of private fund advisers: (1) inadequate disclosure of conflicts of interest, (2) inaccurate allocations and disclosures of fees and expenses, and (3) failure to properly maintain, establish and enforce policies and procedures relating to material non-public information (“MNPI”).

Conflicts of Interest Disclosures

The Staff underscores the antifraud provisions in Section 206 of the Investment Advisers Act of 1940 (the “Advisers Act”).  In particular, the Staff cautions advisers who are subject to these antifraud provisions to eliminate or otherwise make “full and … Keep reading

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