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Private Fund Due Diligence

Let's address the semantics. A "compliance review" and an "operational due diligence review" are not necessarily mutually exclusive. How can an operational due diligence engagement be performed without understanding the compliance posture of the subject entity? While a compliance review of a regulated business must also address the applicable regulation, a review of both regulated and unregulated entities examine similar facets of the operations. There is compliance with regulatory rules, compliance with self imposed firm policies and procedures, and there are best practices to consider. All address operational risk at some level. The risk of inadequate compliance for both regulated and unregulated entities carries significant exposure which could impact operations. We believe many aspects of a traditional compliance review are only a subset of an operational due diligence review.

Traditional compliance consulting services include, but are not limited to, addressing the regulations and best practices established by the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Securities Exchange Act of 1934, the Securities Act of 1933, and the Managed Funds Association. The President's working groups for both private fund managers and investors have issued best practices.

Operational Due Diligence services focus on all aspects of operations and, depending on the engagement, may include extending beyond the investment manager’s operations. SEC3 will extend the reach and assess the investment vehicles’ structure and the risks related to activities performed by the services providers (administrators, transfer agents, auditors and lawyers etc.) We will drill down and provide a detailed report of our findings against the backdrop of the industry’s current best practices. Based on our assessment and through discussions with you, we offer recommendations, suggest practical enhancements, and assist in the implementation. We recognize each client is unique and always customize our deliverable to specifically meet those unique client needs whether they are investors, managers, directors or even regulators. Prior to performing any engagement, we sit down with each client to gain a thorough understanding of their due diligence focus and agree on a detailed scope for the engagement. Quite often, we are able to provide considerable input at this stage and as we identify areas of risk that the client may not have yet considered.

SEC3 examines the business to determine risk exposure from various perspectives. Each constituent has their unique concerns depending on their relationship to the entities involved. Based on the particular client type our detailed processes confirm whether appropriate controls are in place to mitigate the corresponding risk.

For managers, a partnership with us affords you the ability to continue to focus on your core business of investing, with the security and confidence that your firm's compliance and operational responsibilities are being properly addressed. Our professionals have the regulatory expertise and industry experience to complement your resources and bridge the gap between operations, the regulations, and applicable best practices.

For investors, SEC3 provides an independent operational due diligence review including compliance of firms and funds operations. We have the knowledge and experience to detect operational weaknesses and strengths. We provide our assessment to you so that you can invest with the security and confidence that necessary controls are in place to mitigate operational risk. Prior to taking on investor and/or institutional clients SEC3 runs a conflict review to ensure our review is conducted at arm’s length. We do not manage assets, perform investment analysis or recommend funds based on investment performance. As such, SEC3 is never faced with the conflict of performing due diligence on its own work.

Newsletter

Get the latest compliance news and insights - delivered weekly. The SEC3 Communique covers all compliance topics. CCO3 focuses on CCO topics.
tip: check both to keep informed!

Communiques

Pre-Dating & Back-Dating are Equally Risky

The SEC today suspended three accountants formerly of BDO USA LLP for improper professional conduct during its 2013 audit of AmTrust Financial Services Inc., an exchange-listed insurance company. According to the... read more »

Fiduciary Duty

On Friday, September 28, 2018 the SEC charged LendingClub Asset Management (LCA) and its former president Renaud Laplanche with fraud for improperly using fund money to benefit LendingClub Corporation (LendingClub),... read more »

Exciting Summer Project -- Dig Into Some Sand or Dig Into Your Firm's Best Ex Pr…

The Office of Compliance Inspections and Examinations (OCIE) issued a risk alert July 11 targeting investment advisers’ most common deficiencies with regard to their best execution obligations under the Investment... read more »

SEC Adopts Fund Liquidity Reporting and Disclosure Changes

The final week of June was a busy one for SEC releases following the SEC’s June 28th open meeting. Among these was a revisit of Rule 22e-4 under the Investment... read more »

More SEC Settlements - This Time Form PF Filing Deficiencies

On June 1st, the SEC announced settlements with 13 RIAs who repeatedly failed to file Form PF reports. Most of these firms never filed over the review period (2012 through... read more »

Two Recent Enforcement Actions Against Private Fund Advisers

The industry should not misinterpret the SEC’s 2018 National Exam Program Priorities as a shift away from private fund advisers. As discussed during the SEC’s recent National Compliance Outreach Seminar... read more »

Events

Dorsey PF 2018 Symposium

When: September 26, 2018 (8:30 am - 6 pm Where: Dorsey & Whitney LLP | 51 W. 52nd Street | New York, NY 10019 Directions > SEC3’s President, Janaya Moscony will join...

Chief Compliance Officer Roundtable: Breakfast Briefing - June 14, 2018

When: June 14, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

Webinar: 2018 SEC Exam Priorities & Recent Exam Highlights

Don’t miss the opportunity to meet with us in person to discuss the topics that matter most to you. Tobin S. Cochran, Managing Member/President of Focus 1 Associates, LLC and...

Chief Compliance Officer Roundtable: Breakfast Briefing - February 7, 2018

When: February 7, 2018 Where: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone: 212.885.5000 Schedule: 9:00-9:30am - Networking...

Upcoming Events - September & October 2017

Upcoming Events Don’t miss the opportunity to meet with us in person to discuss the topics that matter most to you. SEC3 is teaming up with industry experts in NYC to discuss...

May 23, 2017 - Webcast: WannaCry Ransomware: Were You Really Protected or Just L…

When: Tuesday, May 23rd, 2017 | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder, BW Cyber Services John Lukan, Managing Director, SEC Compliance Consultants, Inc. We...

June 14, 2017 - Compliance Breakfast Briefing

8:30-9:00am - Networking and Continental Breakfast 9:00-10:30am - Program Location: Willkie Farr & Gallagher LLP | 600 Travis Street | Suite 2310 | Houston, TX Barry Barbash from Willkie Farr & Gallagher LLP,...

June 13, 2017 - Compliance Breakfast Briefing

8:30-9:00am - Networking and Continental Breakfast 9:00-10:30am - Program Location: Haynes and Boone, LLP | 2323 Victory Avenue | Suite 700 | Dallas, TX 75219 Validated parking is available in the garage attached...

May 31, 2017 - Chicago

9:00-9:30 a.m - Networking and Continental Breakfast 9:30-11:00 a.m - Program Location: Baker & McKenzie LLP | 300 East Randolph Drive | Suite 5000 | Chicago, IL 60601 Kristin Gonzalez and Jerome Tomas...

May 17, 2017 (NYC WIMF)

This event is by invitation only. Please email info@seccc.com to learn more.

May 15, 2017 (NYC Chief Compliance Officer Roundtable)

9:00-9:30am - Networking and Continental Breakfast 9:30-11:00am - Program Location: Blank Rome LLP | The Chrysler Building | 405 Lexington Avenue | New York, NY 10174 | 22nd Floor Boardroom | Phone:...

Webcast: The Most Insidious Cybersecurity Threat Is Also The Least Understood

When: Tuesday, April 25th | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder, BW Cyber Services John Lukan, Managing Director, SEC Compliance Consultants, Inc. Ransomware, the...

CCO Liability (Part III): Managing Liability Webinar

In this webinar, panelists discuss indemnifications and insurance as potential remedies to address the direct financial risks to a CCO. Attendees will learn: What terms and conditions should Chief Compliance Officers be...

Webinar: CCO Liability (Part III): Managing Liability: Navigating Indemnities an…

When: Tuesday, February 21, 2017 Schedule: 11:00am ET / 10:00am CT / 9:00am MT / 8:00am PT / 7:00am AT Description of Webinar: The National Society of Compliance Professionals is pleased to host...

Webcast: SEC 2017 Examination Focus Area – Cybersecurity Testing

Penetration Testing & Vulnerability Assessments - Examining the SEC & FINRA Requirements When: Wednesday, January 25th | Schedule: 12pm - 1pm EST Who: Paul Caiazzo, CEO and Co-Founder, TruShield Security Solutions Michael Brice, Founder,...