Private Fund - Inspection Program
The SEC continues to remind all advisers, including hedge fund, private equity and venture capital fund managers (“Private Fund Managers”) that they are subject to the anti-fraud provisions of the Advisers Act. The SEC has brought a number of actions against unregistered hedge fund managers recently and this trend is expected to continue.SCA offers an inspection program to Private Fund Managers that are not registered with the SEC covering certain high-risk areas that could result in regulatory and/or investor liability. These inspections can provide assurances to Private Fund Managers and potential and current investors. SCA staff assigned to conduct these inspections are attorneys, CPAs and compliance professionals with experience in the private fund industry.
The following areas are covered during these inspections:
- Compliance with the investment program described in offering documents
- Valuation of portfolios;
- Analysis of financial documents to ensure that payments are made in accordance with disclosures provided to investors;
- Analysis of brokerage and trading practices;
- Review of all correspondence with investors and any marketing materials (including performance) used to solicit investors;
- Compliance with suitability requirements;
- Compliance with registration exemptions under the Securities Act of 1933 (including Regulation D), the Advisers Act, and the Investment Company Act of 1940);
- Review of side letters;
- Compliance with Section 12(d)(1) of the Investment Company Act;
- Compliance with regulatory reporting requirements (e.g. 13D, 13G, 13F, Hart Scott Rodino, Forms 3,4 and 5 of Section 16, as applicable); and
- Other areas that may be considered high risk based upon the client’s particular fund strategies and business model.
For those Private Fund Managers that are not required to register as investment advisers under the Advisers Act, SCA has designed a compliance program specific to the private fund industry.
