SEC Chief of Enforcement Division's Asset Management Unit, Bruce Karpati, Remarks on Enforcement Priorities in the Alternative Space

The SEC Enforcement Division's Asset Management Unit Chief, Bruce Karpati, delivered a speech on current hedge fund enforcement priorities before the Regulatory Compliance Association. See below for topics included in his speech:

• Development of specialized enforcement units within the SEC, including one focused on hedge funds;
• The Risks to Hedge Fund Investors, particularly "retail" investors, and potentially greater worries as a result of the general advertising permitted by the JOBS Act;
• The Operating Model of Alternative Investment Vehicles (temptation to boost fees by showing high returns; lax valuation procedures; potential for misuse of nonpublic information; conflicts of interest; lack of independent governance)
• Hedge Fund Managers as Fiduciaries;
• Types of Hedge Fund Misconduct (review of some of the principal cases brought against hedge funds);
• Risk-Analytic Initiatives (essentially saying that the SEC looks for bad actors by, among other things, looking for funds that show eccentric returns, e.g., returns that are too high or too steady);
• Intersection with Regulation (all the new filing requirements have given the SEC far more information about funds); and
• Best Practices.

Click here to view speech in full (links externally to SEC website).