Private Fund Adviser Rules: Best Practices | Part 2 - Fund Audits

For a fund that the advisor neither controls nor is under common control, the advisor only needs to take all reasonable steps to cause the fund to undergo an audit that meets the Custody Rule requirements. When selecting an auditor, the advisor should consider whether the auditor has experienced auditing advisors with similar fund structures, and whether the auditor and fund administrator have a history of working together on fund audits, as to make for a more seamless audit process. Now, once the advisor has selected an auditor, the advisor should establish a timeline with the auditor and the fund administrator for the delivery of key deliverables; ensure all requests are fulfilled and provided in accordance with the timeline; provide documentation of accounting policies and implementation of internal monitoring controls; have a valuation policy in place describing the methodology it uses to value its investments; have in place effective monitoring systems to ensure the funds are operating in accordance with its business plans.

To support compliance with the record keeping requirement, advisors should make and retain a copy of the audited financial statements that it distributes to investors, specifically noting the name of each investor, investor's address and the dates of issuance.

That concludes Part 2 of Best Practices to Take from the Private Fund Adviser Rules. Thank you for watching and join me in the next episode in the SEC Regulatory Compliance Series. Again, my name is TaNeka Ray with EisnerAmper. I welcome you to connect with me on LinkedIn.