In 2 separate actions, the SEC came down very hard on private equity/hedge funds regarding both disclosure and operational issues.  See; and

In the first action, a firm settled for $1 million because it allegedly mischaracterized its prior investments in its marketing materials.  This purported misrepresentation led to an over-statement of the fund’s performance.  The SEC brought an action against the fund for allowing such an over-inflation in its disclosures to occur.   Similarly, the SEC drained nearly $2 million out of another fund that was charging its portfolio companies for “services” thereby obtaining most of its costs, and then did not disclose it or obtain informed consent from these companies.

The bottom line for these actions is that the SEC does not like when funds try to “pull the wool” over their clientele or business partners.  If these funds had sought out securities counsel, they likely would not have had to endure these actions because they would have been advised of the SEC’s tendencies.