Guide to SEC Registration of Hedge Funds

8142019 Guide to SEC Registration of Hedge Funds

httpslidepdfcomreaderfullguide-to-sec-registration-of-hedge-funds 119

Guide to SEC Registration

for

Private Fund Investment Advisers

Pursuant to the Private Fund Investment Advisers Registration Act of 2010

The guide was prepared by SEC Compliance Consultants Inc in response to the July

21

st

2010 passage of the Private Fund Investment Advisers Registration Act of 2010(ldquothe Registration Actrdquo) which is part of the larger Dodd-Frank Wall Street Reform and

Consumer Protection Act The Registration Act has significant implications for many

currently unregistered US and non-US advisers of private funds

July 21st

2010

Disclaimer SEC Compliance Consultants Inc is not a law firm and does not provide legal advice This document should

not be considered legal advice on any subject matter The information contained in this document is presented withoutany warranty or representation as to its accuracy or completeness or whether it reflects the most current regulatory

developments This document is provided for general information purposes only Further distribution of this document is

permitted so long as its distribution is solely for the purposes discussed in this disclaimer and consequently the

distributing party cannot be held liable for its accuracy or completeness or whether it reflects the most current

regulatory developments



SEC Compliance Consultants Inc Bridging your Compliance Gap

Telephone 6104159261 Facsimile 6102001463 wwwseccccom 2

Table of Contents

Private Fund Investment Advisers Registration Act of 2010 3

Implications for Investment Advisers to Private Funds 6

Compliance Rule - Advisers Act Rule 206(4)-7 7

Registration Process 10

Form ADV - Disclosure Requirements 10

Associated Costs 15

Life after Registration 16

Contact Information 19





Private Fund Investment Advisers Registration Act of 2010

Today July 21st 2010 the President signed into law the Dodd-Frank Wall Street Reform

and Consumer Protection Act which includes in Title IV the Private Fund Investment

Advisers Registration Act of 2010 (the ldquoRegistration Actrdquo) The Registration Act among

other things amends the Investment Advisers Act of 1940 (the Advisers Act) and has

significant implications for advisers to both US and non-US domiciled private funds

The Registration Act eliminates the exemption from registration with the Securities and

Exchange Commission (ldquoSECrdquo) for private fund advisers who have fewer than 15 clients

and do not hold themselves out to the public as investment advisers Consequently

unless an investment adviser to a private fund qualifies for another exemption they will

be required to register with the SEC

The Registration Act provides for new exemptions and certain exclusions from SEC

Registration These are as follows

Private Fund Advisers with AUM Less than $150 million Exempt from SEC

registration are investment advisers that advise only private funds 1

Foreign Fund Advisers Exempt from registration are ldquoforeign fundadvisersrdquo defined as an adviser that (i) has no place of business in the

United States (ii) has fewer than 15 clients and investors in the United

States in private funds (iii) has aggregate AUM attributable to investors in

the United States of less than $25 million and (iv) does not hold itself out to

the public in the United States as an investment adviser

and

have AUM less than $150 million

Family Offices Excluded from the definition of an investment adviser is any

family office The SEC is to define ldquofamily officerdquo although the SEC must be

consistent with previous exemptive policy and must also include a

grandfathering provision effective January 1 2010

1ldquoPrivate Fund is defined as an issuer that relies upon the exclusion from the definition of

investment company provided for in Sections 3(c)(1) or 3(c)(7) of the Investment Company Actof 1940





Venture Capital Advisers Exempt from registration are investment

advisers who advise solely ldquoventure capital fundsrdquo However advisers who

qualify for this exemption will have a recordkeeping and reporting

obligation Both the definition of a ldquoventure capital fundrdquo and the exact

recordkeeping and reporting requirements are to be defined by the SEC

Commodity Trading Adviser Exempt from registration are advisers

registered with the Commodities Futures Trading Commission (ldquoCFTCrdquo) as

long as the CFTC registered adviser advises a private fund and is not

predominately providing securities-related advice

The Registration Act introduces the term ldquoMid-Sized Private Fund Advisersrdquo although it

is not defined The Registration Act directs the SEC to develop specific registration and

examination procedures for investment advisers to mid-sized private funds based on

whether a mid-sized private fund poses systemic risk after taking into account their size

governance and investment strategies Presumably the SEC will define Mid-Sized

Private Fund Advisers and develop rules regarding specific registration and examination

procedures of such mid-sized private fund advisers State regulations and applicability

may vary and will need to be assessed as well

The Registration Act also affects ldquoMid-Sized investment Advisersrdquo by effectively raising

the minimum threshold for SEC registration from $25 million to $100 million As such

these effected advisers with assets under management ranging from $25 million to $100

million will now be forced to shift their registration from the SEC to the states unless (i)

the investment adviser is not required to be registered with the state securities

regulator in the state where they maintain their principal office and place of business

and (2) would not be subject to examination as an investment adviser by such state

regulator

The Registration Act also addresses both the ldquoaccredited investorrdquo standard and the

ldquoqualified clientrdquo standard The accredited investor standard is immediately adjusted

upon enactment to exclude the value of a natural personrsquos primary residence from the

$1 million net worth threshold The standard would apply to new investors and tocurrent investors making additional purchases In addition after the first four years

there is a provision for the SEC to adjust the standard Within the first year of the

Registration Actrsquos enactment the SEC is required to adjust the ldquoqualified clientrdquo

standard for inflation and every five years thereafter





The Registration Act deems the records and reports of private funds advised by an

investment adviser registered under the Registration Act to be records and reports of

the investment adviser It also allows the SEC to require registered and unregistered

investment advisers to maintain certain records of and file with the SEC such reports

regarding private funds advised by the investment adviser as necessary and

appropriate in the public interest and for the protection of investors or for the

assessment of systemic risk by the Financial Stability Oversight Council (ldquoCouncilrdquo) As

well both registered and unregistered advisers to private funds will be required by the

SEC to maintain with respect to each private fund advised a description of

bull assets under management and leverage

bull counterparty credit risk exposure

bull trading and investment positions

bull valuation policies and practices

bull types of assets held

bull side arrangements or side letters

bull trading practices and

bull other information that the SEC deems necessary and appropriate in the

public interest and for the protection of investors and the assessment of

systemic risk

All reporting to the SEC in accordance with the Registration Act will be expressly exempt

from public disclosure pursuant to the Freedom of Information Act although the SEC

will be authorized to share the information with the Council and other government

agencies All agencies receiving the information will also be required to keep all

information confidential

The Registration Act becomes effective one year following the date of enactment

although Investment advisers to private funds may voluntarily register with the SEC

during this one year period During the next twelve months the SEC will be active

promulgating numerous rules and providing clarification





Implications for Investment Advisers to Private Funds

The Registration Act requires advisers to quickly become familiar with the Advisers ActImportant considerations include but are not limited to

bull Compliance - new registrants would be required to adhere to the Advisers

Act Rule 206(4)-7 known as the Compliance Rule which requires

establishing written Policies and Procedures and appointing a competent

Chief Compliance Officer (CCO) Key to establishing an adequate

compliance program is evaluating and properly documenting existing and

potential conflicts of interest The SEC wants assurance that advisers have

a mechanism in place to identify risks conflicts of interest and have

established a system of internal controls to mitigate those risks

bull Disclosure - Registrants are subject to the Advisers Act disclosure rules

requiring the preparation and filing of Form ADV Part I and Part II See the

Form ADV section for a detailed review of Form ADV

bull Books and Records - In addition to following the books and records

requirements applicable to all registered advisers the books and records

of private fund advised by investment advisers to private funds are now

deemed to be books and records of the Adviser The SEC will now have

the authority to examine these books and records

bull Performance Fees ndash Registrants must follow Rule 205-3(d)(1) of the

Advisers Act which limits the ability to charge performance feesPerformance based compensation can be paid if the advisers clients are

qualified clients If you manage a 3c(1) fund and charge a performance

fee you will need to determine if your clients meet the ldquoqualified clientrdquo

threshold

bull Investment Advisory Contracts ndash With respect to the anti-fraud provisions

of the Advisers Act the SEC cannot define the term ldquoclientrdquo to include an

investor in a private fund managed by an investment adviser provided

that the adviser has entered into an advisory contract with such private

fund Many private funds may not have investment advisory agreements

separate and apart from the limited partnership or limited liability

company agreements We suggest that private fund managers review

these arrangements and enter into investment advisory agreements as

necessary and appropriate





Compliance Rule - Advisers Act Rule 206(4)-7

Effective October 5 2004 SEC Rule 206(4)-7 (ldquothe Compliance Rulerdquo) became effective

for all SEC-registered advisers The rule reads as follows

If you are an investment adviser registered or required to be registered

under section 203 of the Investment Advisers Act of 1940 it shall be

unlawful within the meaning of section 206 of the Act for you to provide

investment advice to clients unless you

(a) Policies and procedures Adopt and implement written policies and

procedures reasonably designed to prevent violation by you and your

supervised persons of the Act and the rules that the Commission has

adopted under the Act

(b) Annual review Review no less frequently than annually the adequacy

of the policies and procedures established pursuant to this section and the

effectiveness of their implementation and

(c) Chief compliance officer Designate an individual (who is a supervised

person) responsible for administering the policies and procedures that you

adopt under paragraph (a) of this section

Under the Compliance Rule it is unlawful for an investment adviser registered with the

Commission to provide investment advice unless the adviser has adopted and

implemented written policies and procedures reasonably designed to prevent violation

of the Advisers Act by the adviser or any of its supervised persons The rule requires

advisers to consider their fiduciary and regulatory obligations under the Advisers Act

and to formalize policies and procedures to address them

Rule 206(4)-7 does not specifically list the elements that advisers must include in their

policies and procedures The SEC acknowledges that advisers are too varied in their

operations for the rules to impose of a single set of universally applicable required

elements Each adviser should therefore adopt policies and procedures that take into

consideration the nature of their specific operations Advisers must therefore havecustomized policies and procedures designed to prevent violations from occurring

detect violations that have occurred and correct promptly any violations that have

occurred





The SEC states the policies and procedures at a minimum should address the

following issues to the extent that they are relevant to that adviser

Policies and Procedures

bull Portfolio management processes including allocation of investment

opportunities among clients and consistency of portfolios with clients

investment objectives disclosures by the adviser and applicable regulatory

restrictions

bull Trading practices including procedures by which the adviser satisfies its

best execution obligation uses client brokerage to obtain research and

other services (soft dollar arrangements) and allocates aggregated trades

among clients

bull Proprietary trading of the adviser and personal trading activities of supervised persons

bull The accuracy of disclosures made to investors clients and regulators

including account statements and advertisements

bull Safeguarding of client assets from conversion or inappropriate use by

advisory personnel

bull The accurate creation of required records and their maintenance in a

manner that secures them from unauthorized alteration or use and protects

them from untimely destruction

bull The marketing of advisory services including the use of solicitors

bull Processes to value client holdings and assess fees based on those

valuations

bull Safeguards for the privacy protection of client records and information and

bull Business continuity plans

Rule 206(4)-7 requires each Adviser to review their policies and procedures annually to

determine their adequacy and the effectiveness of their implementation The reviewshould consider any compliance matters that arose during the previous year any

changes in the business activities of the adviser or its affiliates and any changes in the

Advisers Act or applicable regulations that might suggest a need to revise the policies or

procedures

Annual Review





Although the rule requires annual reviews advisers should also be conducting interim

reviews by testing and assessing on an ongoing basis how significant compliance

events changes in business arrangements and regulatory developments affect the

advisers business

Rule 206(4)-7 requires each adviser registered with the SEC to designate CCO to

administer its compliance policies and procedures An Adviserrsquos CCO should be

competent and knowledgeable regarding the Advisers Act and should be empowered

with full responsibility and authority to develop and enforce appropriate policies and

procedures for the firm Thus the CCO should have a position of sufficient seniority and

authority within the organization to compel others to adhere to the compliance policies

and procedures

Chief Compliance Officer

What about Outsourcing the CCO Role

Some advisers inquire about outsourcing the CCO position The SEC does not explicitly

prohibit outsourced CCOrsquos However we believe that the SEC does not look favorably

upon hiring a third-party to serve as an adviser CCO The Compliance Rule requires the

CCO to be a ldquosupervised personrdquo which is defined as ldquohellipany partner officer director (or

other person occupying a similar status or performing similar functions) or employee of an investment adviser or another person who provides investment advice on behalf of

the investment adviser and is subject to the supervision and control of the investment

adviserrdquo The CCO is required to administer the firmrsquos written compliance procedures

We believe that advisers that attempt to outsource this role are generally perceived

negatively by the SEC and subject to increased scrutiny This does not mean that all

firms need to hire a dedicated CCO In many instances and in particular for certain

advisers to solely private funds an existing executive such as the CFO 2

2

The CFO is often a logical choice given hisher familiarity with internal controls and auditing

However other firm officers such as COO General Counsel and portfolio manager have also

successfully fulfilled the role

can effectively

function in both capacities However the ultimate decision should be made after a





careful assessment of an adviserrsquos business model infrastructure and available

resources In many cases a cost effective solution is to use the services of an outside

third party to assist with compliance rather than have a full-time dedicated compliance

person

Registration Process

1 Complete Entitlement Forms and submit to FINRA in order to gain access to the

IARD system which is required to begin the registration process This process

takes approximately 10 days

2 File Form ADV Part 1 electronically through IARD This process can take up to 45

days before approval is received by the SEC

3 Complete form ADV Part II and Schedule F in hard copy which should be

complete before beginning operations as a registered adviser

4 Prepare a customized Compliance Program including written policies and

procedures (compliance manual)

Form ADV - Disclosure Requirements

Form ADV is divided into 3 parts

Part 1A - Includes information about the adviser its business practicesthe ownership structure and the client base Part 1A is mandatory for

those advisers registering with the SEC andor state securities

authorities

Part 1B -Concerns state registration and is only required if an adviser is

registering with the state(s)

Part II - Known as an adviserrsquos brochure Part II along with its

accompanying schedules form the basis of the required adviser

disclosures to existing and potential clients In addition it is required to

be amended whenever material changes occur that affect an advisersbusiness Form ADV Part II is also required to be offered at least

annually to existing clients and documentation must be retained

demonstrating that such offer was made





FORM ADV Part I

The Table below highlights the various sections of Part I and is offered to demonstrate

what information the SEC is seeking from advisers When changes occur to many of

these sections in ADV Part I amendments are required to be filed promptly Although

promptly is undefined it is generally interpreted to mean within 30 days of the

change

Part 1A - Item 1 Identifying Information

Part 1A - Item 2 SEC Registration

Part 1A - Item 3 Form of Organization

Part 1A - Item 4 Successions

Part 1A - Item 5 Information About Your Advisory Business

Part 1A - Item 6 Other Business Activities

Part 1A - Item 7 Financial Industry Affiliations

Part 1A - Item 8 Participation or Interest In Client Transactions

Part 1A - Item 9 Custody

Part 1A - Item 10 Control Persons

Part 1A - Item 11 Disclosure Information

Part 1A - Item 12 Small Businesses

Part 1B - Item 1 State Registration

Part 1B - Item 2 Additional Information

Schedule A Direct Owners and Executive Officers

Schedule B Indirect Owners

Schedule C Amendments to Schedule A and B

Schedule D Page 1 to 5 Additional Information to Certain Sections of Part 1





FORM ADV Part II - Brochure

On July 21st 2010 the SEC voted unanimously to adopt changes to Form ADV Part II

Commonly referred to as the investment adviserrsquos ldquobrochurerdquo this document is theprincipal disclosure document that registered investment advisers must provide their

clients and prospective clients The ldquobrochurerdquo provides to both existing investors and

potential investors in plain English narrative and investment adviserrsquos qualifications

investment strategies business practices conflicts of interest compensation and

disciplinary history

Proper disclosure is often an adviserrsquos best defense against enforcement action being

taken under the anti-fraud provisions of the Advisers Act Consequently properly

completing this document is critical to satisfying an adviserrsquos regulatory obligations The

main disclosure topics in the brochure which the SEC believes are most relevant to

investors include

Advisory business mdash An investment adviser must describe its advisory business

including the types of advisory services offered state whether it holds itself out as

specializing in a particular type of advisory service and disclose the amount of client

assets that it manages

Fees and compensation mdash An investment adviser must describe how it is

compensated for its advisory services provide a fee schedule and disclose whether

fees are negotiable The investment adviser must also describe the types of other

fees or expenses such as brokerage fees custody fees and fund expenses thatclients may pay in connection with the services provided

Performance-based fees and side-by-side management mdash An investment adviser

that accepts performance-based fees or that supervises an individual who accepts

such fees is required to disclose this fact If the investment adviser also manages

accounts that are not charged a performance fee the adviser must explain the

conflicts of interest that arise from the simultaneous management of these

accounts and must describe how it addresses those conflicts

Methods of analysis investment strategies and risk of loss mdash An investment adviser

must describe its methods of analysis and investment strategies and explain that

investing in securities involves risk of loss which clients should be prepared to bear

Investment advisers who use a particular method of analysis or strategy or who

recommend a particular type of security are required to explain the material risks

involved and discuss the risks in detail if those risks are unusual





Disciplinary information mdash An investment adviser is required to disclose in its

brochure material facts about any legal or disciplinary event that is material to a

clientrsquos evaluation of the advisory business or to the integrity of its management

personnel An investment adviser must deliver promptly to clients updated

information when there is new disclosure of a disciplinary event or a material

change to an existing disciplinary event

Code of ethics participation or interest in client transactions and personal trading

mdash An investment adviser is required to describe briefly its code of ethics and state

that a copy is available upon request The adviser must also disclose whether it or

an affiliate recommends to clients or buys or sells for client accounts securities in

which the adviser or an affiliate has a material financial interest and if so the

conflicts of interest associated with that practice The adviser also must disclose

whether it or an affiliate invests (or is allowed to invest) in the same securities that

it recommends to clients or in related securities such as options or other

derivatives and must explain the conflicts involved and how it addresses those

conflicts In addition an investment adviser that trades in the recommended

securities at or around the same time as the client has to explain the specific

conflicts inherent in that practice and how it addresses them

Brokerage practices mdash An investment adviser is required to describe the factors

considered in selecting or recommending broker-dealers for client transactions and

determining the reasonableness of brokersrsquo compensation Investment advisers also

must disclose soft dollar practices (research or other products or services other

than execution provided by brokers or a third party to the investment adviser in

connection with client transactions) client referrals (using client brokerage to

compensate brokers for client referrals) directed brokerage (asking or permitting

clients to send trades to a specific broker for execution) and trade aggregation

(bundling trades to obtain volume discounts on execution costs) Investment

advisers must explain how they address the various conflicts of interest associated

with these practices

It is paramount that registered investment advisers understand that any issues which a

client or potential client would deem material must be disclosed even if not explicitly

asked in ADV Part II





As with ADV Part I the newly adopted rules pertaining to ADV Part II will require the

ldquobrochurerdquo to be filed electronically on the SECrsquos website and will be publicly available

An adviser must deliver the brochure to a client before or at the time the adviser enters

into an advisory contract with the client Furthermore advisers must provide each

client an annual summary of material changes to the brochure and either deliver a

complete updated brochure or offer to provide the client with the updated brochure

An adviser will be required to deliver ldquobrochure supplementsrdquo to new and prospective

clients providing them with information about the specific individuals who will provide

services to the clients The supplement will contain brief reacutesumeacute-like disclosure about

the educational background business experience other business activities and

disciplinary history of the individual so that the client can assess the personrsquos

background and qualifications It will also include contact information for the personrsquos

supervisor in case the client has a concern about the person

Establishing a Compliance Program

While the Compliance Rule appears relatively straight forward with regard to

establishing policies and procedures it is more involved than meets the eye The

Compliance Rule specifically lists 10 items which at a minimum need to be included

However it is misleading to expect the SEC to be satisfied if you only develop policies

and procedures covering these 10 areas The regulators certainly expect to see

additional items included For example a robust compliance manual would also contain

additional sections including but by no means limited to advisory contracts proxy

voting payment of fees supervision and SEC and State registration

When assisting clients through the registration process the bulk of our time is spent on

customizing the compliance manual The manual should be a dynamic document that

evolves with the business The SEC periodically throughout the year provides guidance

to firms with regard to expectations Inevitably some of these items represent areas of

current high interest to the SEC Consequently the compliance manual and program

should be dynamic and updated periodically as the rules best practices and your

business changes





Associated Costs

Cost to Comply

As private funds consider registration it is important to remember that implementing

an adequate compliance program is a must-have that will require time and expense to

establish There will also be on-going costs associated with maintaining and enforcing a

properly established compliance program Regardless of size and complexity there are

certain minimal requirements which must be present in all compliance programs

Moreover the actual compliance program must be customized to each adviserrsquos unique

business risks The actual costs are therefore very much directly associated with the

complexity of the business At a minimum each adviser will have to appoint a

competent CCO familiar with the various rules and regulations However the CCOshould also have the stature and authority within the organization to administer and

enforce the compliance program A tone of compliance from senior management is very

important to creating the necessary culture of compliance within an organization

Each registered investment adviser needs to assess their unique situation and business

model when determining how best to allocate resources to compliance While larger

advisers often have dedicated compliance and perhaps internal audit they need to

consider the adequacy and independence of their internal reviews being performed

in-house Smaller advisers need to assess the cost benefit trade-off of staffing a

compliance department with sufficient personnel to ensure suitable and timelymonitoring and testing versus outsourcing part of the testing and review of compliance

to an independent third party

Cost of non - Compliance Failure to establish an adequate compliance program has

resulted in enforcement actions being brought against CCOs and Adviserrsquos The actual

costs associated with non-compliance may include significant fines and censures as well

as employees being barred from working in the industry In addition to fines the

reputational damage can be staggering Consequently CCOs need to ensure they are

working for a firm which has the proper compliance culture CCOs should be prepared

to walk away from a position if they are not completely satisfied with their employers

commitment to establishing an effective compliance program

A recent enforcement case involved a CCO being held liable for aiding and abetting his

employers failure to establish maintain and enforce policies and procedures designed

to prevent violations of the regulations In this particular case the CCO was not involved







Some of our traditional compliance related services which are useful to all registered

investment advisers include but are not limited to

Quarterly Compliance Reviews

Most advisers prefer to distribute the strain on their operations over the course of the

year Quarterly Compliance Reviews spread all the aspects of the annual review over the

course of the year in manageable phases while revisiting critical and changing areas

throughout the year The dynamic scope and disciplined approach of Quarterly

Compliance Reviews stimulates the evolution of the compliance program keeping it

continually current and addressing any issues as they emerge Quarterly Compliance

Reviews optimize compliance resources and limit the disruption to your firm Like the

Annual Compliance Review each Quarterly Compliance Review concludes with a

customized easy to read report and action plan

Additionally Quarterly Compliance Reviews address the essential on-going demands of

a compliance program such as managing disclosure documents filing requirements

and compliance policies and procedures Quarterly Compliance Reviews provide the

opportunity for SEC3s professionals to establish a strong working relationship with each

adviser and fund and actively participate in the compliance program

Mock SEC Examinations

Much of the fear surrounding a regulatory examination stems from the unknown

element A Mock SEC Examination is an effective process to gauge the types of

exposures and concerns that an adviser or fund would face during a real regulatory

examination Our Mock SEC Examinations bring the same SEC focus utilizing proven

exam approaches and methodologies including interviews reviews of policy and

procedures analysis testing and conclude with a customizable summary of

assessments recommendations and proposed solutions SEC3s professionals many

with years of experience as senior examiners with the SEC or as compliance

professionals provide expert insight and guidance Mock SEC Examinations pierce the

mystique of a regulatory examination and transform an often stressful experience into avaluable assessment process that allows a Chief Compliance Officer and the compliance

staff to face a future regulatory examination with confidence and peace of mind





Annual Compliance Review

For registered advisers the Compliance Rule requires each adviser to review its policies

and procedures at least annually to determine their adequacy and the effectiveness of

their implementation If advisers are not performing any reviews during the year the

annual review is necessary During an annual compliance review SEC3 provides

independence and assists Chief Compliance Officers in every phase of the annual review

process from formulating a strategic plan to conducting thorough assessments and

testing of all aspects of the compliance program to planning for next years review

SEC3s Annual Compliance Review allows advisers to maximize available resources by

fulfilling specific elements or the entire scope of the regulatory obligation The Annual

Compliance Review concludes with a customizable easy to read report and action plan

Risk Assessment amp Gap Analysis

The Risk Assessment amp Gap Analysis not only fulfills regulatory expectations it provides

valuable insights into your risk profile and your exposure to those risks SEC3s Risk

Assessment amp Gap Analysis is based on our experience as ex SEC examiners Our system

considers the likelihood and impact of the compliance risks specific to each advisory

firm or fund and assesses how well the existing controls mitigate those risks The Risk

Assessment amp Gap Analysis report is a concise but detailed summary in plain English

that prioritizes risks by exposure arming the Chief Compliance Officer and seniormanagement with the critical information to immediately implement an action plan

Compliance Testing amp Analysis

Forensic tests are the eyes and ears of the Chief Compliance Officer Rigorous

consistent forensic testing provides a Chief Compliance Officer with an early warning

system Various forensic tests are means to identify symptoms of potential compliance

problems and can serve as confirmation that the compliance program is functioning

properly SEC3 can assist Chief Compliance Officers in designing and conducting a

battery of rigorous and periodic forensic compliance tests as part of the continuous

monitoring of the compliance program including but not limited to trading and

execution portfolio compliance code of ethics account administration and investment

performance




Compliance Training

Drafting and adopting reasonable policies and procedures is only part of the successful

implementation of a compliance program effective compliance training is also essential

The success of a compliance program is predominately determined by the ability of the

advisers or funds staff to consistently fulfill the goals and functions of the policies and

procedures SEC3s professionals will assist Chief Compliance Officers in developing and

conducting customized training programs to your staff and boards on the various

aspects of your compliance program and their responsibilities under that program Our

belief is that training should rejuvenate the staffs awareness and sensitivity of

compliance policies while reinforcing the importance of each persons role in the

compliance program

Contact Information

For additional information please contact Janaya Moscony CFA President amp Founder

of SEC Compliance Consultants Inc by telephone at 6104159261 x1 or email us at

janayaseccccom





Table of Contents

Private Fund Investment Advisers Registration Act of 2010 3

Implications for Investment Advisers to Private Funds 6

Compliance Rule - Advisers Act Rule 206(4)-7 7

Registration Process 10

Form ADV - Disclosure Requirements 10

Associated Costs 15

Life after Registration 16

Contact Information 19

























and




































regulator






























systemic risk




































threshold











































occurred











restrictions




among clients





advisory personnel






valuations







procedures

Annual Review








advisers business







and procedures














2




can effectively









person















authorities













FORM ADV Part I





change


































investors include

























































































business changes





Associated Costs

Cost to Comply

































































































performance




Compliance Training










compliance program

Contact Information



janayaseccccom

























and




































regulator






























systemic risk




































threshold











































occurred











restrictions




among clients





advisory personnel






valuations







procedures

Annual Review








advisers business







and procedures














2




can effectively









person















authorities













FORM ADV Part I





change


































investors include

























































































business changes





Associated Costs

Cost to Comply

































































































performance




Compliance Training










compliance program

Contact Information



janayaseccccom





























regulator






























systemic risk




































threshold











































occurred











restrictions




among clients





advisory personnel






valuations







procedures

Annual Review








advisers business







and procedures














2




can effectively









person















authorities













FORM ADV Part I





change


































investors include

























































































business changes





Associated Costs

Cost to Comply

































































































performance




Compliance Training










compliance program

Contact Information



janayaseccccom























systemic risk




































threshold











































occurred











restrictions




among clients





advisory personnel






valuations







procedures

Annual Review








advisers business







and procedures














2




can effectively









person















authorities













FORM ADV Part I





change


































investors include

























































































business changes





Associated Costs

Cost to Comply

































































































performance




Compliance Training










compliance program

Contact Information



janayaseccccom



























threshold











































occurred











restrictions




among clients





advisory personnel






valuations







procedures

Annual Review








advisers business







and procedures














2




can effectively









person















authorities













FORM ADV Part I





change


































investors include

























































































business changes





Associated Costs

Cost to Comply

































































































performance




Compliance Training










compliance program

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Documents

Guide to SEC Registration of Hedge Funds