Investment advisers that fail to follow their own policies, procedures and disclosures are exposing themselves to significant regulatory risk. An SEC enforcement action against a hedge fund manager and its principal is a recent example of this danger. The manager and its principal, contrary to their disclosures to investors, allegedly benefited themselves by disproportionately allocating favorable trades to funds in which they held interests and by using soft dollar credits earned through client trading to pay the principal’s personal expenses and for other impermissible purposes. This article summarizes the relevant procedural background of the enforcement action, the alleged misconduct and the terms of the settlement order. See “RCA Session Spotlights Risks With Investment Allocation, Trade Execution, Soft Dollars, Client Solicitation and Valuation” (Apr. 14, 2016).