In recent years, the Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) has been paying close attention to the fees and expenses charged by private funds and their investment advisers. On April 12, 2018, the staff of OCIE released a risk alert that identified the latest list of compliance issues regarding advisory fees and expenses that frequently arise from its examination of SEC-registered investment advisers. This note briefly summarizes the issues identified by the OCIE staff and discusses best practices for private fund advisers to address these issues.

PRIVATE FUND FEE AND EXPENSE ISSUES -

..Incorrect Account Valuations in Fee Calculation. Investment advisers used a different valuation metric or a different accounting process than what was disclosed, resulting in incorrect valuations and, therefore, given that fees are usually charged based upon those valuations, incorrect fee charges...