The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Wed, 08 Apr 2026 11:32:13 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png The Blurring Line Between SEC Examinations and Enforcement – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 The Blurring Line Between SEC Examinations and Enforcement https://corpgov.law.harvard.edu/2012/03/28/the-blurring-line-between-sec-examinations-and-enforcement/?utm_source=rss&utm_medium=rss&utm_campaign=the-blurring-line-between-sec-examinations-and-enforcement https://corpgov.law.harvard.edu/2012/03/28/the-blurring-line-between-sec-examinations-and-enforcement/#comments Wed, 28 Mar 2012 14:53:47 +0000 http://blogs.law.harvard.edu/corpgov/?p=26928?d=20150113150241EST Posted by Mark K. Schonfeld, Gibson, Dunn & Crutcher LLP, on Wednesday, March 28, 2012
Editor's Note:

Mark Schonfeld is a litigation partner at Gibson, Dunn & Crutcher LLP and co-chair of the firm’s Securities Enforcement Practice Group. This post is based on a Gibson Dunn client alert by Mr. Schonfeld, available here; this alert was originally prepared for the Practising Law Institute’s “Hedge Fund Registration and Compliance 2012″ conference.

I. Introduction

The most significant impact of SEC registration on private fund advisers is that the adviser becomes subject to inspection by the SEC’s Office of Compliance Inspections and Examinations (OCIE). The greatest risk arising from an examination is that the inspection staff decides to refer finding from an inspection to the Division of Enforcement for an investigation. This article discusses the risks of an examination becoming an investigation and strategies for anticipating and mitigating those risks. [1]

II. The Risk That an Examination Results in a Referral to Enforcement

Asset managers are particularly vulnerable to collateral consequences of a government investigation. Particularly in the wake of recent cases, many investors have little tolerance for fund managers who are subject to an investigation, thus making flight of capital a real risk for advisers under investigation. Stark examples of this played out over the last year when the F.B.I. executed search warrants in November 2010 on four hedge funds. Of the four funds raided, three ceased doing business even in the absence of criminal charges. [2]

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