As many as nine out of every ten SEC examinations result in staff identifying deficiencies in a private fund manager’s business practices or compliance program. The question, then, is not how to prevent staff from the SEC’s Division of Examinations (Examinations) from finding deficiencies during an exam. Instead, fund managers should focus on how to best prepare for such a finding and effectively respond to a deficiency letter in a way that addresses exam staff’s concerns, is not overly burdensome to the business, assuages LPs and does not arouse the ire of the SEC’s Division of Enforcement. This first article in a two-part series covers the exam and deficiency process; steps fund managers can take before an SEC exam to mitigate damage; and preliminary steps managers should take to prepare their response to a deficiency letter after an exam has ended. The second article will offer tips on ways to respond to Examinations staff upon receiving a deficiency letter; considerations when drafting a deficiency response letter; strategies for implementing the enumerated remedies; and guidance for how and whether to disclose either letter to LPs. See our two-part series: “What to Expect During an SEC Examination and How to Prepare” (May 30, 2024); and “Trends in Topics Targeted During Recent SEC Examinations of PE Sponsors” (Jun. 13, 2024).