Washington, D.C. (October 25, 2023) - On
October 16, 2023, the U.S. Securities and Exchange Commission's
("SEC") Division of Examinations ("Division")
released its 2024 examination priorities. The
examination priorities outline the key risks, examination topics
and priorities that the Division intends to focus on in the coming
year when conducting examinations and inspections of SEC-registered
investment advisers, investment companies, broker-dealers, transfer
agents, municipal advisors, securities-based swap dealers, clearing
agencies, and self-regulatory organizations.
Continued Focus on Investment Advisers to Private
Funds
With respect to examinations and inspections of investment advisers, the Division noted that it will continue to focus on advisers to private funds and prioritize specific topics, such as:
- Portfolio management risks related to exposure to recent market volatility and higher interest rates (e.g., funds experiencing poor performance, significant withdrawals and valuation issues and private funds with more leverage and illiquid assets).
- Adherence to contractual requirements (e.g., regarding limited partnership advisory committees, and contractual notification and consent requirements).
- Accuracy of calculations and allocations of private fund fees and expenses (both fund-level and investment-level), including valuation of illiquid assets, calculation of post- commitment period management fees, adequacy of disclosures, and potential offsetting of such fees and expenses.
- Due diligence practices for consistency with policies, procedures, and disclosures, particularly with respect to private equity and venture capital fund assessments of prospective portfolio companies.
- Conflicts, controls, and disclosures regarding private funds managed side-by-side with registered investment companies and use of affiliated service providers.
- Compliance with Advisers Act requirements regarding custody, including accurate Form ADV reporting, timely completion of private fund audits by a qualified auditor and the distribution of private fund audited financial statements.
- Policies and procedures for reporting on Form PF, including upon the occurrence of certain reporting events.
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