SEC Continues Focus on Private Fund Adviser Disclosures and Other Topics
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- The Division of Examinations (“EXAMS”) of the U.S. Securities and Exchange Commission (the “SEC”) published a risk alert (the “Risk Alert”) detailing certain compliance issues observed by EXAMs staff in their examinations of private fund advisers. The Risk Alert identified four areas of deficiencies: (i) failure to act consistently with disclosures; (ii) use of misleading disclosures regarding performance and marketing; (iii) due diligence failures relating to investments or service providers; and (iv) use of potentially misleading “hedge clauses.”
- The Risk Alert focused on certain types of management fee calculations, LPAC review of conflicts, use of predecessor performance, citation of awards in adviser advertising and “hedge” clauses in client agreements. The Risk Alert makes clear that it should be viewed collectively with prior risk alerts applicable to private fund advisers issued on June 23, 2020 and February 7, 2017.