SEC rulemaking implementing the Dodd-Frank Act will require many previously unregistered hedge fund managers to register by March 30, 2012.  See “SEC Delays Registration Deadline for Hedge Fund Advisers, and Clarifies the Scope and Limits of Registration Exemptions for Private Fund Advisers, Foreign Private Advisers and Family Offices,” Hedge Fund Law Report, Vol. 4, No. 21 (Jun. 23, 2011).  One of the more onerous consequences of registration is that registered hedge fund managers are subject to routine SEC examinations.  See “Key Insights for Registered Hedge Fund Managers from the SEC’s Recently Released Study on Investment Adviser Examinations,” Hedge Fund Law Report, Vol. 4, No. 5 (Jun. 23, 2011).  (While unregistered hedge fund managers typically are not subject to routine SEC examinations, the SEC has authority to issue subpoenas even to unregistered hedge fund managers in cases where the agency suspects fraud on the part of the manager or any of its employees.)  Earlier this year, we conducted a series of interviews with experienced veterans of hedge fund manager examinations.  See Part 1, Part 2 and Part 3 of our examinations series.  One of the key themes that emerged from those interviews is that a large part of the examination “battle” is won or lost before an examination begins.  In other words, preparation is paramount in surviving an examination.  And preparation cannot start upon receipt of notification of an examination.  According to Part 1 of our examinations series, the longest lead time that a hedge fund manager realistically can expect between notification and commencement of an examination is one week.  However, as discussed more fully below, one week is typically the minimum duration of a mock examination – and that is not counting preparation for the mock examination and responding to any findings, which together would lengthen that one-week period considerably.  In sum, preparation is key and notice is short.  The implication is that the time to prepare for an examination is as soon as possible, ideally, now.  While there are few certainties in law, one proposition that is reasonably close to certain is that you do not want the SEC to discover any compliance, operational or similar shortcoming for the first time in the course of an examination.  Rather, you want to know about any such shortcoming well in advance of an SEC visit, so that you can correct the shortcoming before the SEC shows up.  In turn, the most effective way to determine what the SEC would uncover is to go through an SEC exam without having the SEC present.  How can managers do that?  Through mock examinations – in essence, an exercise in which a third party (often a compliance consultant or law firm) goes through many of the same motions as the SEC examination staff, but with different goals and consequences.  The goal of a mock exam is to prepare a hedge fund manager for an SEC exam, whereas the goal of an SEC exam is to protect the investing public through enforcement of the federal securities laws.  The consequence of discovery of a bad fact in the course of a mock examination is an opportunity to correct, whereas the consequence of discovery of a bad fact in the course of an SEC examination could be a referral to the SEC’s Enforcement Division or, worse, to the DOJ.  To maximize the value and effectiveness of our subscribers’ preparation for SEC and other regulatory examinations, we have undertaken an analysis of many of the most important considerations for hedge fund managers in connection with mock examinations.  This article embodies our analysis.  In particular, this article discusses: the seven overlapping goals of mock examinations of hedge fund managers; the types of entities that provide mock examinations; four areas of expertise that a hedge fund manager should look for in a mock examination provider; the market for the costs of a mock examination, including cost levels and inputs that determine costs; the substance and process of a mock examination, that is, what exactly goes on during the course of one; 13 topics that are currently of interest to SEC examiners, and that therefore play a large role in determining the scope and substance of a mock examination; whether or not a mock examination report should be written, or delivered exclusively orally; contractual and legal strategies for maintaining the confidentiality of mock examinations; and considerations with respect to the timing and level of disclosure to hedge fund investors of the fact or findings of a mock examination.