A recent SEC settlement emphasizes the importance for hedge fund managers of adequately disclosing risks to investors.  The SEC alleged that two affiliated registered investment advisers touted the soundness of several hedge funds, even as those funds sold assets and sought loans to provide liquidity.  This article summarizes the SEC’s order against the investment advisers, including the alleged marketing misrepresentations that gave rise to the specific violations charged by the SEC.  For discussion of another recent enforcement action against one of the investment advisers, see “Failure to Regularly Audit Compliance and Surveillance Systems May Carry Significant Consequences,” Hedge Fund Law Report, Vol. 8, No. 33 (Aug. 27, 2015).  For another recent enforcement action involving misrepresentations to investors, see “Public Pension Plan Investments May Increase the Risk That Hedge Fund Managers May Breach Fiduciary Duties,” Hedge Fund Law Report, Vol. 8, No. 24 (Jun. 18, 2015).