On March 4, 2013, the SEC staff published a Risk Alert addressing custody-related compliance gaps that the Office of Compliance Inspections and Examinations uncovered in numerous recent examinations of registered investment advisers, including hedge fund managers.  The SEC identified custody-related compliance issues in approximately one-third (approximately 140) of recently-conducted examinations of registered advisers, and some cases were referred to the Division of Enforcement for further action.  Hedge fund managers should pay close attention to the deficiencies highlighted in the Risk Alert as many directly impact on their businesses, operations and compliance practices.  This article highlights those deficiencies that are particularly relevant for hedge fund managers.  See also “How Does the SEC Approach Custody Issues in the Course of Examinations of Hedge Fund Managers?, Hedge Fund Law Report, Vol. 5, No. 18 (May 3, 2012).