Introduction
The United States Securities and Exchange Commission (“SEC”) has initiated an administrative enforcement proceeding against an investment adviser firm registered with the SEC for allegedly failing to file the quarterly Form13F from February 2017 until April 2022.
Regulatory Background
Pursuant to Section 13(f) of the Securities Exchange Act, the SEC requires that an investment adviser firm, which exercise investment discretion over at least $100 million in securities traded on a national securities exchange, must file the Form 13F on a quarterly basis.
The Form 13F must be filed within 45 days of the end of each calendar quarter. The initial report must be filed at the end of the first year in which the institutional investment manager exceeds the $100 million threshold. The most current listing of Section 13(f) securities can be viewed at the SEC’s Official List of Section 13(f) Securities webpage.
The Form 13F is intended to provide a disclosure of the investment adviser firm’s managed securities positions, thereby serving as a central repository of data about the investment activities of institutional managers. This information is crucial for both investors and government regulators to monitor market activities and ensure compliance with securities laws.
Violations
According to the SEC, the investment adviser firm managed private fund assets since January 2010. However, the firm came under the SEC’s scrutiny for its activities from December 2016 through March 2022. During this period, the investment adviser firm allegedly had investment discretion over more than $100 million in reportable securities, making it obligatory for the firm to file quarterly Forms 13F starting in February 2017. Despite this requirement, the investment adviser firm supposedly failed to file any Forms 13F until April 2022. The SEC asserts that the firm’s holdings of these securities increased steadily over the years, exceeding $800 million by late December 2021. The SEC found that this persistent failure to file the required forms constituted a willful violation of Section 13(f)(1) of the Securities Exchange Act and Rule 13f-1 thereunder.
Settlement and Sanctions
The investment adviser firm submitted an Offer of Settlement to the SEC, which the Commission accepted. The firm consented to the entry of an Order Instituting Administrative and Cease-and-Desist Proceedings without admitting or denying the findings, except for the Commission’s jurisdiction over it and the subject matter of these proceedings, which were admitted. As part of the settlement, the SEC imposed several remedial sanctions on the investment adviser firm:
- Cease-and-Desist Order: The firm was ordered to cease and desist from committing or causing any violations and any future violations of Section 13(f)(1) of the Securities Exchange Act and Rule 13f-1 promulgated thereunder.
- Censure: The firm was officially censured by the SEC.
- Financial Penalty: The firm was ordered to pay a civil money penalty of $150,000 to the SEC for transfer to the general fund of the United States Treasury.
Takeaway
The SEC’s enforcement action against an investment adviser firm for allegedly failing to file the Form 13F serves as a critical reminder for investment advisers to adhere to regulatory requirements meticulously. The case underscores the importance of transparency and timely filing of the Form 13F, which is fundamental to maintaining the integrity of financial markets and safeguarding investor interests. To the extent that an investment adviser firm currently has discretionary investment authority over $100 million or more of securities and is not currently filing the Form 13F, the firm should review the SEC’s list of Section 13(f) securities and consult with his or her compliance professional in order to verify whether filing is required. For additional details about this SEC enforcement action, please review the Order Instituting Administrative and Cease-and-Desist Proceedings.
Related Resources
WSP/CoE Section Update – Section 13 Filings
- Included with an Annual Compliance Program (Bronze, Silver, Gold, Platinum & Titanium packages) through our Knowledge Base , or
- Available for an a la carte purchase through our Online Store
Recorded Webinar: Conducting an Annual Compliance Review – Form 13F Filings
- Included with an Annual Compliance Program (Bronze, Silver, Gold, Platinum & Titanium packages) through our Knowledge Base , or
- Available for an a la carte purchase through our Online Store
FAQs: Form 13F, Form SH, Schedule 13D & Schedule 13G
SEC Proposed Changes to Form 13F for Institutional Investment Managers (8/3/2020)
Deadline Approaching for Filing the Form 13F with the SEC (1/12/2015)
SEC Settles a Form 13F Filing Violation for a $100,000 Penalty (8/16/2007)
Disclosures
The information contained in this blog post is general in nature intended for educational purposes only and is not intended to be a comprehensive analysis of this topic. This is merely a summary and does not necessarily include all material facts from the proceeding or order. RIA Compliance Consultants, Inc. has not verified the accuracy of the securities regulator’s order and is not offering any opinion whether the allegations made by the securities regulator in the administrative proceeding referenced above are accurate. This post is not intended to constitute compliance consulting advice or apply to any particular investment adviser firm’s specific situation. Please consult the applicable securities regulator’s order, rules and published guidance for more details about the topics referenced above. RIA Compliance Consultants, Inc. is not a law firm and does not provide legal services. For more information about the limitations of this blog post and information on our website, please see our Disclosures webpage.
Posted by Bryan Hill
Labels: Enforcement, Form 13F, SEC
Tagged: Form 13F, SEC
