Time is running out for hedge fund advisors to get ready for SEC registration by the February 2006 deadline, warned SEI, an asset management services and investment technology solutions provider.
In a recent web seminar hosted by the SEI Knowledge Partnership, regulatory experts voiced concern that hedge fund advisors may be underestimating the preparation needed in advance of registering.
The SEI panelists also cautioned fund and advisor chief compliance officers to allow sufficient lead time for preparation of the first mandatory annual review of their adopted compliance programs. Most of the officers are due to submit that review in March 2006.
“Filling out Form ADV is the least of the registration process,” said Jim Volk, chief accounting officer and chief compliance officer for SEI’s Investment Manager Services business. “What takes time is developing the policies and procedures hedge funds must have to operate in a regulated environment. That is a profound change, and advisors who haven’t already geared up for it may find themselves scrambling.”
Volk urged hedge fund advisors to go on the assumption that they could be subject to an SEC exam any time after February 1st.
“When the SEC arrives, they will expect to see that since February 1, 2006 you’ve been conducting your business in a manner consistent with their requirements,” he emphasized. Volk also said a hastily assembled registration application could be a red flag inviting even closer SEC scrutiny.
The SEI session also highlighted issues that should be among top compliance priorities for 2006, including e-mail retention, omnibus transparency rules, pending soft-dollar rules, and anticipated point of sale disclosure requirements.
“On all of these issues, it boils down to one message,” said Paul Schaeffer, Director of the SEI Knowledge Partnership. “Don’t get so wrapped up in the nuts and bolts of regulation that you ignore how new or pending rules will affect your business, or how you must change the ways you operate in order to be in compliance. As with icebergs, the biggest worry is often what lies below the surface.”