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Tips to Ensure SEC Compliance for Private Fund Advisers

When the U.S. Securities and Exchange Commission (SEC) issues a guidance impacting long-standing practices for fund advisers, it’s important that these professionals take action quickly to ensure they are in compliance with all relevant federal laws and regulations.

This has become an important issue, as the SEC is now giving out record amounts in rewards to whistleblowers, leaving private fund advisers at risk of exposure — simply for using methods that may have been considered best practice in the very recent past. The SEC is also actively targeting investment advisers for violations like inadequate disclosures and improper fees.

To that end, several attorneys with experience in this area of the law have put together a list of ways to help ensure compliance. These include the following:

  • Encourage internal reporting: Private fund advisers are urged to promote a culture of compliance within their organizations, going as far as to create a system for internal reporting and making sure employees are actually using it.
  • Take internal complaints seriously: When an organization becomes aware of a potential violation, it should take action quickly to investigate. Doing so will help the entity receive credit from the SEC for being proactive in addressing the complaint.
  • Investigate thoroughly: The SEC will look favorably on entities that conduct comprehensive investigations into whistleblower complaints. The organization should address the misconduct and self-report to the SEC, if it makes sense to do so.
  • Address external whistleblowers: Private fund advisers should remember that whistleblower complaints may come from outside sources — and not just unhappy employees. In fact, more than half of all whistleblower awards have been given out to non-employees of companies.
  • Do not retaliate: A common mistake many organizations make is to take retaliatory action against whistleblowers. This usually only exacerbates the problem and can be counterproductive to an effective investigation.

As a private fund adviser, it is absolutely critical to respond effectively to any whistleblower claims to best protect your organization. To learn more, consult a knowledgeable Dallas attorney at Whistleblower Law for Managers.

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