Hedge Funds

Its just the latest one, but its telling: Private equity fund adviser First Reserve Management on September 14 settled SEC claims that it failed to disclose conflicts of interest involving fees and expenses it charged its funds.

Dont think it stops with disgorgement and a civil money penalty. Some advisory firm managers may face jail time if the government thinks the offense is serious enough.

Advisers to private equity funds preparing for a visit from SEC examiners need to keep their eye on the ball: While examiners may inquire into a number of areas, the bulk of the visit is likely to be spent on the fees and expenses charged to funds and portfolio companies.

SEC chair Mary Jo White found what may have been an unexpected missive in her office mailbox a few days ago: a letter from eight Senate Democrats and independent senator Bernie Sanders requesting that the agency publish an investor bulletin "that consolidates the SECs findings and warnings with respect to private equity investments."

Before the SEC adopts a new definition of "accredited investor," the Investment Adviser Association wants that definition to include persons who hire a registered investment adviser to manage their investments on a discretionary basis. But if the Commission does so, it will be going against the wishes of its staff, which recommended against such a move.

Whats worse than one hedge fund manager charged with insider trading at your firm? Two hedge fund managers charged with insider trading. This might usually be said in humor, but not in this case.

Is it a harbinger of things to come? A private equity fund adviser and its owner on June 1 paid more than $3.1 million to settle charges from the SEC that they, among other things, charged fees for brokerage services, but failed to register as a broker-dealer with the Commission.

The proposed rule issued May 6 by the SEC and five other federal agencies that would prohibit financial institutions from offering incentive-based compensation encouraging inappropriate risk taking should be viewed with concern by at least large investment advisers. While the rule would affect only advisers with more than $1 billion in assets, the way the SEC counts such advisers may mean that some firms that believe they are under the threshold may actually fall within it.

When it comes to playing offense in the private equity arena, SEC Division of Enforcement director Andrew Ceresney is not only making clear what the agencys targets are - hes seeking to neutralize the opposition by letting advisers and their attorneys know what defenses wont work.

The SEC on April 22 issued the final version of its five-year strategic plan. The adopted version of the "Strategic Plan Fiscal Years 2014-2018" looks remarkably like the February 2014 draft version, with one of the few exceptions being the addition of providing guidance to private fund advisers.