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OCIE Director Wary of Control Issues in Alternative Funds

In a recent speech, Director of the SEC’s Office of Compliance Inspections and Examinations, Andrew Bowden, asked the audience to be especially cautious when offering new products, making sure that the organization has appropriate controls in place.  Mr. Bowden discussed alternative funds specifically, an area that his office plans to look at closely in the coming months.  He noted the rapid increase in assets in alternative funds over the last few years, with more than 400 funds now labeled "alternative."  He stated that daily valuation and daily liquidity “require a tremendous amount of control and discipline” – a difficult task for private fund advisers without experience in the 1940 Act or advisers to 1940 Act funds with little experience in alternative investments.  He ended his discussion of alternative funds by saying “alternative funds are the bright, shiny object … but they are a sharp object.  If any of you have launched, or are considering launching, a mutual fund that uses alternative investments or strategies, I implore you to evaluate the reasonableness and effectiveness of your controls.”


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