As discussed in this prior post, the final deadline for previously exempt advisers (including advisers to hedge funds and private equity funds) to become registered with the SEC is March 30, 2012. The SEC is already showing signs that it intends to actively and aggressively pursue investigations and enforcement actions against advisers to private funds as evidenced by a recent enforcement action, In the Matter of Matthew Crisp, a principal of a registered adviser to private equity funds. The SEC’s order alleges breach of fiduciary duties, usurping investment opportunities, failing to disclose conflicts of interest, and violations of the adviser’s code of ethics and policies and procedures.
In the Matter of Matthew Crisp enforcement action is a strong indication that the SEC intends to scrutinize the activities of private equity fund managers, particularly with regards to disclosing and mitigating conflicts of interest and handling co-investments. It also reinforces the importance of establishing effective written policies and procedures that are reasonably designed to ensure compliance with federal securities laws. Of particular importance is adequacy in addressing conflicts of interest and personal trading activities of advisory firm personnel, such as the firm’s co-investment policy. The registration deadline is rapidly approaching and advisers to private equity funds should begin to take steps to ensure that an effective and appropriate compliance program is in place by the time they become registered.
For additional information on the SEC’s increased scrutiny of private equity fund managers or for assistance in creating and implementing compliance policies and procedures, please contact Adam Stutz, Compliance Consultant by email at firstname.lastname@example.org or by phone at (619) 278-0020.