INVESTMENT ADVISER LAW BLOG

As noted in a previous post, the Deputy Director of the SEC’s Office of Compliance Inspections and Examinations (OCIE) recently gave a speech that quantified some of the effects that Dodd-Frank has had on registered investment advisers. OCIE’s Deputy Director also suggested ten takeaways for advisers to hedge funds now that they are registered. The list is also a helpful reminder for previously registered advisers.

1. Review your control and compliance policies and procedures annually.
2. Assess and prepare for Form PF requirements. (Form PF will require advisers with at least $150 million in private fund assets to make periodic reports.)
3. Identify risks–i.e., those factors that may create risk exposure for the adviser or its clients.
4. Enhance your expertise. Make sure employees are knowledgeable about the adviser and applicable rules and procedures.
5. Verify client assets. Regulatory examiners will likely verify some or all of an adviser’s assets. Advisers should make sure they have done adequate due diligence on their service providers and consultants.
6. Get rid of any silos, identify conflicts. Identify areas where the adviser’s interests may conflict with those of clients. Make sure those risks are managed and disclosed.
7. Provide clear, complete, and accurate disclosure in performance and advertising.
8. Verify portfolio management compliance.
9. Address your complaints. Make sure the adviser’s procedures provide adequate instruction for handling complaints and following up to make sure they have been resolved.
10. Check your IT security. Make sure that clients’ assets and information are not at risk.

Nothing on the list breaks new ground but it does give a blueprint of the areas that OCIE will be focusing on when examining fund managers.

Sources:

• Speech by SEC Staff: What SEC Registration Means for Hedge Fund Advisers

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Jack G. Martel is the author of Investment Adviser Law Blog which is devoted to providing information and discussion of interest to investment advisers, private fund managers and others in the financial management industry. Jack is a partner in Ragghianti | Freitas LLP. He has over fifteen years experience in general business and securities transactions with a focus on assisting investment advisers, fund sponsors and managers in all manner of legal, regulatory and compliance issues. Jack can be reached at 415.453.9433.

Tagged: Compliance, Dodd-Frank, Hedge Fund, Investment Adviser, Private Equity, SEC

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