The United States Securities and Exchange Commission (SEC) has recently fined an Iowa-based investment adviser $1 million for alleged cybersecurity failures that led to a data breach that compromised the personal information of its clients. According to the SEC, information from over 5,600 of the investment adviser’s clients was obtained by criminals impersonating independent advisers. The SEC claims that the intruders gained access through weaknesses within the firm’s cybersecurity procedures. Some of these weaknesses had been exposed during previous fraudulent activity. The investment adviser allegedly failed to update and fix those issues.
Category Archives: SEC
SEC Settles Charges of Undisclosed Conflict in Advisory Decision
September 06, 2018
The U.S. Securities and Exchange Commission (“SEC”) recently announced that it has settled charges with an investment adviser firm. The SEC alleged that the investment adviser failed to disclose a conflict of interest. The settlement ended in payment of $8.9 million to the SEC by the investment adviser.
The U.S. Securities and Exchange Commission (“SEC”) released a package of new rule proposals in April of 2018. The SEC’s proposed rules and guidance can be found here.
SEC Fines Investment Adviser for Failing to Refund Unearned Fees When Client Terminates Advisory Services
July 26, 2018
The U.S. Securities and Exchange Commission (“SEC”) recently settled with an investment adviser firm which allegedly had improperly refused to refund $131,000 in unearned advisory fees to 63 departing investment advisory clients. The SEC censured the investment adviser firm and imposed a $100,000 civil penalty on it. The SEC also imposed a $50,000 penalty on the investment adviser firm’s majority owner.
Private Fund Adviser Enforcement Action
June 26, 2018
The U.S. Securities and Exchange Commission (“SEC”) has charged 13 different registered investment adviser firms which advised private funds for failing to properly file reports with the SEC.
SEC Targets Investment Adviser for Misleading Clients
June 19, 2018
On June 4, 2018 the SEC (Securities and Exchange Commission) issued a press release announcing the imposition of an $8 million civil penalty against an investment adviser in New York for failing to disclose conflicts of interest to its clients. The SEC also announced the filing of a litigated action against two investment adviser representatives of the firm for misleading clients and concealing material conflicts of interest. The investment adviser neglected to disclose agreements with product and service providers that led to the investment adviser receiving undisclosed compensation. The Director of the SEC’s New York Regional Office said, “Investment advisers have an obligation to disclose direct and indirect financial incentives to clients.” Click here to read the SEC’s press release.
On April 12, 2018, the Office of Compliance Inspections and Examinations (“OCIE”) of U.S. Securities and Exchange Commission (“SEC”) released a Risk Alert, “Overview of the Most Frequent Advisory Fee and Expense Compliance Issues Identified in Examinations of Investment Advisers.” The risk alert provides a list of compliance issues frequently identified in OCIE examination deficiency letters relating to fees and expenses charged by SEC registered investment advisers. Click here to read the SEC’s Risk Alert.
Cherry Picking – SEC Cease-and-Desist Proceeding
March 28, 2018
In March 2018 the U.S. Securities and Exchange Commission (SEC) instituted an administrative cease-and-desist proceeding against an investment adviser firm in response to an alleged fraudulent “cherry-picking” scheme. The SEC asserts that from 2012-2015 the investment adviser firm disproportionately allocated profitable trades to a personal account, while disproportionately allocating unprofitable trades to client accounts. The firm, which had approximately $7.5-$9 million in assets under management, was fined $48,000 by its state securities regulator for failure to enforce its own supervisory procedures concerning trade allocation. Specifically, the state regulator found the investment adviser firm did not always pre-allocate block trades and did not retain a record of how block trades were pre-allocated. Click here to read the SEC’s full action.
SEC Compliance Outreach Program – Date Set for National Seminar
February 14, 2018
The U.S. Securities and Exchange Commission (SEC) recently announced that its Compliance Outreach Program National Seminar for investment adviser firms will be held on Thursday, April 12, 2018 in Washington, DC. This SEC event is designed to help chief compliance officer make improvements to his or her investment adviser firm’s compliance program. For an employee of an SEC registered investment adviser firm to attend in person, he or she can register online at https://regandsurvey.sec.gov/NoviSurvey/TakeSurveyPage.aspx?s=be9d4ac36e2c40e19efaef0ce7079d06&tsid=8ff8c4079869425ea960fd3130c3cdff&c=en-US . Additionally, the seminar will be broadcast live via the Internet which can be accessed at sec.gov .
On August 7, 2017, the Office of Compliance Inspections and Examinations (“OCIE”) of U.S. Securities and Exchange Commission (“SEC”) released a Risk Alert which details its examination of the cybersecurity preparedness of 75 broker-dealers, investment advisers and investment companies in the U.S. In comparison to prior cybersecurity examinations, this exam involved more active testing and validation of the firms’ procedures and controls related to cybersecurity. Click here to read the Risk Alert.
