On December 20, 2024, the SEC announced that it had brought charges against a hedge fund manager that invests heavily in distressed companies for alleged securities violations relating to its internal policies and procedures. In the SEC’s view, the manager’s compliance department should have been more proactive and more closely monitored the activities of a consultant and his use of material nonpublic information (MNPI) gleaned in the course of his work on creditors’ committees. However, it is important to note that the SEC did not actually charge the manager or consultant with any improper use of MNPI but with a failure to implement and enforce reasonably designed compliance policies and procedures to prevent such misuse. The manager has denied any wrongdoing, stating that it was “shocked” at the SEC’s characterization of its internal compliance culture. This article summarizes the case and presents key takeaways for fund managers seeking to avoid any potential complications around the use of MNPI. See “Inadequate MNPI Policies Cost CLO and Hedge Fund Adviser $1.8 Million” (Nov. 21, 2024).