Recent SEC Focus on the Internal Marketing Activities of Private Funds

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I. Comments by the SEC on Marketing of Private Funds

Last Friday, April 5, 2013, at an American Bar Association conference in Washington, D.C., David Blass, the Chief Counsel of the Securities and Exchange Commission’s (the “SEC”) Division of Trading and Markets, expressed concern at the way many private funds market interests in those funds through internal marketing personnel without the involvement of an SEC-registered broker-dealer.1 As a result, Mr. Blass stated that the SEC was subjecting private fund advisers to an “increased examination focus” with respect to the internal marketing activities of such advisers.

Mr. Blass noted that the SEC no longer views an unregistered broker claim as an “add on” claim to be brought only with another “main” claim, such as an allegation of fraud; rather, the SEC will consider enforcement actions for standalone claims of acting as an unregistered broker, and the SEC’s examination staff, through its Office of Compliance Inspections and Examinations, views internal marketing by private funds as a priority exam matter.

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Recent SEC Focus on the Internal Marketing Activities of Private Funds

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