Understanding OCIE’s Focus on Electronic Communications, Liquidity‑Related Issues and Affiliate Transactions (Part Two of Two)

The SEC’s Office of Compliance Inspections and Examinations (OCIE) finds itself in a bit of a balancing act right now, as it seeks to monitor pandemic-related conduct by fund managers while also continuing to oversee traditional private fund issues. The result for many managers in recent months has been an exam experience focused on a hybrid of issues. For example, OCIE has been probing for situations where liquidity mismatches in funds disadvantage investors, while also scrutinizing conflicts from sponsor employees serving as directors on portfolio company boards. In a webinar hosted by the Practising Law Institute, those issues were addressed by a panel featuring Ken C. Joseph, managing director and head of disputes consulting at Duff & Phelps; Andrew Weilbacher, director of Promontory Financial Group; Marc E. Elovitz, partner at Schulte Roth & Zabel; and Barry W. Rashkover, partner at Sidley Austin. This second article in a two-part series explains OCIE’s concerns about electronic communications, liquidity-related issues and affiliate transactions. The first article detailed what to expect from an OCIE exam during the pandemic, as well as the agency’s focus on alternative data. For more on what to expect from the SEC in the months ahead, see our two-part series: “Former SEC Staff Forecast the Biden Administration’s Potential Impact on the Agency’s Enforcement Efforts” (Dec. 1, 2020); and “Former SEC Staff Expect Aggressive Private Funds Scrutiny to Be a Priority Under the Biden Administration” (Dec. 8, 2020).

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