The SEC’s Division of Examinations (Division) – formerly the Office of Compliance Inspections and Enforcement, or OCIE – recently issued a risk alert on notable compliance issues its staff identified during examinations of private fund managers (Risk Alert). Among other issues, the Risk Alert details a lack of compliance resources; a dearth of autonomy and empowerment of CCOs; and a failure to adequately tailor and implement policies and procedures across an array of areas. Simultaneously, Division Director Peter Driscoll emphasized the severity of those issues in remarks (Speech), which supplemented the Risk Alert by further explaining the Division’s stance on certain key issues therein. Taken together, the Risk Alert and Speech highlight the poor compliance practices widespread at private fund managers at a time when the SEC under newly appointed Chair Gary Gensler is likely to cast a more critical eye toward the funds industry. This first article in a two-part series analyzes the Division staff’s observations about the lack of resources, primitive information technology capabilities and marginalized CCOs at fund managers. The second article
will detail the Risk Alert’s warnings about deficient annual reviews and ill-tailored policies, along with certain high-level takeaways to consider. See our two-part coverage of the Division’s risk alerts on private funds: “Focus on Conflicts; Fees and Expenses; and MNPI
” (Aug. 25, 2020); and “Key Takeaways for Managers
” (Sep. 1, 2020).