Guide To Sec Registration Of Hedge Funds

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 21st, 2010, passage of the Private Fund Investment Advisers Registration Act of 2010 (“the Registration Act”), 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 U.S. and non-U.S. advisers of private funds.

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July 21 , 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 without any 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

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

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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 “Registration Act”). The Registration Act, among other things, amends the Investment Advisers Act of 1940, (the "Advisers Act") and has significant implications for advisers to both U.S. and non‐U.S. domiciled private funds. The Registration Act eliminates the exemption from registration with the Securities and Exchange Commission (“SEC”) 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 and have AUM less than $150 million. Foreign Fund Advisers: Exempt from registration are “foreign fund advisers” 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. Family Offices: Excluded from the definition of an investment adviser is any family office. The SEC is to define “family office” although the SEC must be consistent with previous exemptive policy and must also include a grandfathering provision effective January 1, 2010.

1

“Private 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 Act of 1940.

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Venture Capital Advisers: Exempt from registration are investment advisers who advise solely “venture capital funds”. However, advisers who qualify for this exemption will have a recordkeeping and reporting obligation. Both the definition of a “venture capital fund” 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 (“CFTC”) 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 “Mid-Sized Private Fund Advisers” 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 “Mid-Sized investment Advisers” 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 “accredited investor” standard and the “qualified client” standard. The accredited investor standard is immediately adjusted, upon enactment, to exclude the value of a natural person’s primary residence from the $1 million net worth threshold. The standard would apply to new investors and to current 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 Act’s enactment, the SEC is required to adjust the “qualified client” standard for inflation and every five years thereafter.

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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 (“Council”). 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: •

assets under management and leverage;

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counterparty credit risk exposure;

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trading and investment positions;

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valuation policies and practices;

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types of assets held;

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side arrangements or side letters;

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trading practices; and

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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.

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Implications for Investment Advisers to Private Funds The Registration Act requires advisers to quickly become familiar with the Advisers Act. Important considerations include, but are not limited to: •

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.

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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.

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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.

•

Performance Fees – Registrants must follow Rule 205 ‐3(d)(1) of the Advisers Act which limits the ability to charge performance fees. Performance based compensation can be paid if the adviser's 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 “qualified client” threshold.

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Investment Advisory Contracts – With respect to the anti-fraud provisions of the Advisers Act, the SEC cannot define the term “client” 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.

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Compliance Rule - Advisers Act Rule 206(4)-7 Effective October 5, 2004, SEC Rule 206(4)‐7 (“the Compliance Rule”) 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 have customized policies and procedures designed to prevent violations from occurring, detect violations that have occurred, and correct promptly any violations that have occurred.

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Policies and Procedures: 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: •

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;

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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;

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

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The accuracy of disclosures made to investors, clients, and regulators, including account statements and advertisements;

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Safeguarding of client assets from conversion or inappropriate use by advisory personnel;

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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;

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The marketing of advisory services, including the use of solicitors;

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Processes to value client holdings and assess fees based on those valuations;

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

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Business continuity plans.

Annual Review 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 review should 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.

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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 adviser's business.

Chief Compliance Officer Rule 206(4)‐7 requires each adviser registered with the SEC to designate CCO to administer its compliance policies and procedures. An Adviser’s 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. What about Outsourcing the CCO Role? Some advisers inquire about outsourcing the CCO position. The SEC does not explicitly prohibit outsourced CCO’s. 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 “supervised person” which is defined as “…any 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 adviser.” The CCO is required to administer the firm’s 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 can effectively function in both capacities. However, the ultimate decision should be made after a 2

The CFO is often a logical choice given his/her familiarity with internal controls and auditing. However, other firm officers such as COO, General Counsel and portfolio manager have also successfully fulfilled the role.

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SEC Compliance Consultants, Inc. Bridging your Compliance Gap

careful assessment of an adviser’s 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 2 3 4

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. File Form ADV Part 1 electronically through IARD. This process can take up to 45 days before approval is received by the SEC. Complete form ADV Part II and Schedule F in hard copy, which should be complete before beginning operations as a registered adviser. 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 practices, the ownership structure, and the client base. Part 1A is mandatory for those advisers registering with the SEC and/or 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 adviser’s 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 adviser's business. 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.

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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

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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 adviser’s “brochure”, this document is the principal disclosure document that registered investment advisers must provide their clients and prospective clients. The “brochure”, provides to both existing investors and potential investors, in plain English narrative and investment adviser’s qualifications, investment strategies, business practices, conflicts of interest, compensation and disciplinary history. Proper disclosure is often an adviser’s 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 adviser’s regulatory obligations. The main disclosure topics in the brochure, which the SEC believes are most relevant to investors, include: Advisory business — 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 — 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 that clients may pay in connection with the services provided. Performance-based fees and side-by-side management — 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 — 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.

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Disciplinary information — An investment adviser is required to disclose in its brochure material facts about any legal or disciplinary event that is material to a client’s 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 — 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 — An investment adviser is required to describe the factors considered in selecting or recommending broker-dealers for client transactions and determining the reasonableness of brokers’ 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.

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As with ADV Part I, the newly adopted rules pertaining to ADV Part II, will require the “brochure” to be filed electronically on the SEC’s 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 “brochure supplements” 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 résumé-like disclosure about the educational background, business experience, other business activities, and disciplinary history of the individual, so that the client can assess the person’s background and qualifications. It will also include contact information for the person’s 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.

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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 adviser’s 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 CCO should 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 timely monitoring 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 CCO's and Adviser’s. 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, CCO's need to ensure they are working for a firm which has the proper compliance culture. CCO's should be prepared to walk away from a position if they are not completely satisfied with their employer's commitment to establishing an effective compliance program A recent enforcement case involved a CCO being held liable for aiding and abetting his employer's 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

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SEC Compliance Consultants, Inc. Bridging your Compliance Gap

with the specific wrong doing. He failed to ensure proper policies and procedures were in place and failed to enforce certain existing procedures. (See A. Carlos Martinez, Exchange Act Release No. 57755, 2008 WL 1913369 ‐May 1, 2008). In another example, a founding partner and shareholder of a firm was found liable for violating a number of rules under the Advisers Act, including the purchase of "prepackaged" policies and procedures which failed to adequately address the conflicts of interest unique to his firm. (See Consulting Services Group, LLC, Securities Exchange Act Release No. 56612, Investment Advisers Act Release No. 2669, 91 S.E.C. Docket 2079 ‐Oct 25, 2007). Both cases resulted in censures and fines to both the CCOs and their firms.

Life after Registration While the compliance program required by the SEC may be new to many private fund advisers, it does not have to be overwhelming. When properly managed, the registration process can be straightforward and the ongoing compliance requirements manageable. Once registered with the Securities and Exchange Commission, private fund managers will be required to follow the same rules as other registered advisers. However, due to the significant differences in business model and infrastructure between many private fund advisers and most traditional investment managers, the compliance resources required to satisfy the rules and regulations associated with SEC registration often vary. In some cases, the resources required of private fund adviser may be less than a traditional manager. Since 2003, our ex-SEC examiners have been providing expert compliance solutions to our clients. To accommodate the unique issues associated with private funds compared to traditional managers, we have designed three distinct compliance programs for private fund managers. These programs are designed to offer a range of cost effective solutions to managers and assist with determining the best use of a manager’s resources to devote to the compliance function and ensure they are meeting their regulatory obligations. They range from full registration with a customized compliance manual to complete outsourced compliance solution. A complete description of these offerings can be found by visiting our Private Fund Adviser Compliance webpage.

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SEC Compliance Consultants, Inc. Bridging your Compliance Gap

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 SEC3's 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. SEC3's 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 a valuable assessment process that allows a Chief Compliance Officer and the compliance staff to face a future regulatory examination with confidence and peace of mind.

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SEC Compliance Consultants, Inc. Bridging your Compliance Gap

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 year's review. SEC3's 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 & Gap Analysis The Risk Assessment & Gap Analysis not only fulfills regulatory expectations, it provides valuable insights into your risk profile and your exposure to those risks. SEC3's Risk Assessment & 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 & Gap Analysis report is a concise, but detailed summary in plain English that prioritizes risks by exposure, arming the Chief Compliance Officer and senior management with the critical information to immediately implement an action plan. Compliance Testing & 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

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SEC Compliance Consultants, Inc. Bridging your Compliance Gap

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 adviser's or fund's staff to consistently fulfill the goals and functions of the policies and procedures. SEC3's 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 staff's awareness and sensitivity of compliance policies while reinforcing the importance of each person's role in the compliance program.

Contact Information For additional information, please contact Janaya Moscony, CFA, President & Founder of SEC Compliance Consultants, Inc. by telephone at 610.415.9261 x1 or email us at [email protected]

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