Strict, no-nonsense examiner for a hedge fund

1. Regulatory baseline: who must register and what examiners look for

Advisers managing private funds past federally defined asset thresholds must register with the SEC and file Form ADV; since Dodd‑Frank removed the private adviser exemption, those registrants are subject to the same oversight, examinations and reporting obligations as other investment advisers . SEC presence exams and periodic on‑site inspections focus on fees and conflicts, custody, marketing and whether the firm’s operations and disclosures match actual practice — examiners will “review your records and sit with you” to test whether the firm complies with the Advisers Act and related rules .

2. Licensing and professional qualifications — what matters to examiners

From a hard‑requirement perspective, managers of larger funds must be federally registered; individual license needs vary by state and activity — Series 65 or Series 7/66 are commonly required unless state exemptions apply, and some states permit waivers for professional credentials like CPA or CFA . Complementary industry certifications such as CFA, CAIA, CMT or compliance‑focused certificates don’t substitute for statutory registration but materially improve credibility and can reduce friction in examinations and investor diligence .

3. What typically triggers exams and the scope of scrutiny

Exams are both routine and event‑driven: registration itself triggers outreach and “presence exams” for new registrants, while red flags — misleading performance, custody weak spots, marketing violations, or unexplained expense allocations — trigger deeper scrutiny . The SEC exam staff has repeatedly flagged misleading performance advertising and improper expense shifts between adviser and fund as recurring deficiencies, and custody obligations and surprise audits are explicit focus areas .

4. Compliance architecture examiners expect to see

Examiners expect written compliance policies, a functioning chief compliance officer, accurate books and records, and documented risk governance — including clear fee and expense allocation policies, custody procedures, and marketing controls — all maintained in a state that allows production during an on‑site review . Increasingly, technology and cybersecurity controls are part of the checklist: the SEC has been elevating cyber governance and breach disclosure expectations as part of IT and operational examinations .

5. Common failings and enforcement exposure

Public reporting from exam teams and enforcement counsel shows recurring errors: inflated or misleading performance data, improper marketing practices under Rule 206‑1, failure to meet custody and audit obligations, and outsourcing or expense allocations that are not adequately disclosed — each of which can lead to enforcement action or investor litigation if material . Whistleblower channels amplify risk: original tips to the SEC that lead to sanctions can yield awards and intensify investigations .

6. Practical, no‑nonsense checklist for a fund preparing for an exam

First, confirm registration status and Form ADV accuracy; second, ensure a documented compliance program with a designated CCO and up‑to‑date policies on fees, custody, marketing and outsourcing; third, maintain complete, auditable books and records and be able to produce them on short notice; fourth, strengthen IT and cybersecurity governance aligned with recent SEC focus; and finally, rehearse the on‑site process with counsel so responses are consistent and documentary . Where reporting is silent, this analysis does not assert best practices beyond the cited guidance and public SEC statements.