If SEC officials raise legitimate concerns with a fund manager during an examination, the manager should not ignore those concerns; mislead the examiners about remedial efforts; and conceal the concerns from investors and auditors. A hedge fund manager and its two principals are currently facing charges in federal court for taking that misguided approach. The SEC Division of Enforcement recently commenced an enforcement action in the U.S. District Court for the Northern District of Illinois against the manager and its principals, alleging that they represented to investors that the adviser valued fund assets in accordance with generally accepted accounting principles when, in fact, it used a “homemade, irregular” model designed to inflate the values of structured notes held by its funds. The defendants allegedly made misrepresentations to not only investors about their valuation practices – even after SEC examiners expressed concerns – but also exam staff about their remedial efforts. In addition, the SEC claimed that the defendants ignored the advice of outside valuation firms and kept their auditor in the dark about an SEC deficiency letter. This article analyzes the SEC’s complaint, which seeks civil penalties and injunctive relief. Although the facts alleged in the complaint, if proven, establish egregious misconduct by the defendants, the action is nevertheless an important reminder of the need for advisers to act in accordance with their representations to investors, be scrupulously honest with the SEC and follow through with representations regarding remedial efforts. See “How Managers Can Navigate the Thin Line Between SEC Examinations and Enforcement” (Nov. 14, 2019).