Due Diligence Risk Alert Issued to Adviser Selecting Alternative Investment

Posted on February 5th, 2014 at 10:00 AM

From the Desk of Jim Eccleston at Eccleston Law Offices:

The SEC is concerned with the due diligence process that investment advisors perform when they recommend or place clients’ assets in alternative investments such as hedge funds, private equity funds, or funds of private funds.

The SEC’s alter notes current industry trends and practices, and highlights certain deficiencies in several of the advisory firms examined.

According to the SEC, investment advisors tend to seek information and data directly from the managers of alternative investments, and then use third parties to supplement and validate that information. In addition, they perform additional quantitative analysis and risk assessment of alternative investments and their managers.

Notably, one deficiency is that many investment advisers failed to review their due diligence polices and procedures in their annual review.

Another deficiency is that many investment advisors do not follow their due diligence procedures described in their advisors’ Form ADV. 

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston

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