When I was on the SEC’s enforcement staff, I had a case once where we were pretty sure our prospective defendant had engaged in insider trading. Our conversation with his lawyer went something like this:¹ Us: Did your guy sell those shares on the basis of material, nonpublic information? Him: No way. In fact, he… Continue Reading
Category Archives: Compliance
Subscribe to Compliance RSS FeedSEC Dings Investment Adviser for Custody Violations, Failure to Supervise
Posted in Compliance, Investment Advisers, Non-scienter-based ViolationsReaders of this space – and SEC observers generally – will recall a March 4 risk alert designed to warn investors about the ways U.S. investment advisers had recently been found to have violated the SEC’s asset custody rule. The number and variety of violations were legion. Advisers were not assuring themselves that clients were… Continue Reading
SEC Highlights Compliance and Ethics for Broker-Dealers
Posted in Broker-Dealers, ComplianceOn Tuesday the SEC held a National Compliance Outreach Program for Broker-Dealers at an open meeting at its D.C. headquarters. The first panel – titled The Role of Compliance and Ethics – was nominally targeted to broker-dealers, but its lessons could be applied to any businesses under significant regulatory scrutiny. The participants were: Merri Jo… Continue Reading
SEC Issues Risk Alert on Investment Adviser Custody Rule
Posted in Auditors, Compliance, Investment Advisers, Non-scienter-based ViolationsThe SEC can express its displeasure with a particular securities practice in a number of different ways, with increasing levels of fun for the alleged malefactor. Here’s a non-exhaustive list: One thing it can do is file an enforcement action in federal or administrative court. This option is not fun at all. It’s not as… Continue Reading
SEC’s Asset Management Unit Focuses on Compliance Failures, Vol. 2
Posted in Compliance, Investment Advisers, Non-scienter-based ViolationsAs we discussed last month, the SEC’s Asset Management Unit has developed a likeness for not just big, headline-grabbing cases, but relatively small compliance-based cases that are designed to prevent minor problems from growing into large ones. People like to say that the damage is done before the SEC ever gets involved, and that is… Continue Reading
SEC’s Asset Management Unit Focuses on Compliance Failures, Vol. 1
Posted in Compliance, Investment Advisers, Non-scienter-based ViolationsThe SEC Enforcement Division’s Asset Management Unit has brought some substantial cases over the last year, including a number arising out of its Aberrational Performance Inquiry. Another focus for the unit has been compliance failures at registered investment advisers. On November 20th, the unit filed a pair of administrative cases addressing some of those failures. … Continue Reading
Saturday Links
Posted in Accounting Fraud, Broker-Dealers, ComplianceGood morning! Some stories for you to read today: The Legal Times reports that Harvey Pitt says the SEC has been saddled with an impossible job in writing rules to implement the JOBS Act. At an ABA conference in D.C., he said, ”We’ll see some sort of scandal rise and of course everyone will blame the… Continue Reading
Khuzami Touts SEC’s Focus on Compliance
Posted in Compliance, Insider Trading, Investment Advisers, Non-scienter-based ViolationsThe SEC’s Enforcement Director, Rob Khuzami, gave an interview to Thomson Reuters last week that you should read. These things are always edited, so it’s hard to know in what order he spoke, but as it is written he gets the interview off to an interesting start. He does not crow about any particularly “big”… Continue Reading
SEC Targets Insider Trading Compliance Failures
Posted in Broker-Dealers, Compliance, Insider Trading, Non-scienter-based ViolationsIn light of Cady’s recent IA compliance gala celebration, I thought I would spend a post discussing In re Janney Montgomery Scott LLC, Admin. Proc. File No. 3-14459 (July 11, 2011), a compliance matter involving a broker-dealer. The case was based in Section 15(g) of the Exchange Act, which requires all registered broker-dealers to establish, maintain,… Continue Reading
SEC Sues IAs for Compliance Failures, Part III
Posted in Compliance, Investment Advisers, Non-scienter-based ViolationsIn the final chapter of this Cady Bar the Door investment adviser extravaganza, we examine In re Feltl & Company, Inc., Admin. Proc. File No. 3-14645 (Nov. 28, 2011). Minneapolis-based Feltl & Co. is a dually-registered broker-dealer and investment adviser, and substantially larger than the other two IAs in the trio, OMNI and Asset Advisors…. Continue Reading
SEC Sues Investment Advisers for Compliance Failures, Part II
Posted in Compliance, Investment Advisers, Non-scienter-based ViolationsThe second of three cases the SEC’s Asset Management Unit brought against registered investment advisers on November 28th, In re OMNI Investment Advisors Inc., Admin Proc. File No. 3-14643 (Nov. 28, 2011), was much like Asset Advisors. OMNI, based in Draper, Utah, had about 190 clients with approximately $65 million in assets under management. OMNI… Continue Reading
SEC’s Asset Management Unit Picks Up Its Game
Posted in Compliance, Investment Advisers, Non-scienter-based ViolationsThe SEC’s Asset Management Unit is making its presence felt. Last week the unit brought a slew of cases against investment advisers and hedge funds that put the group on the forefront of the Enforcement Division’s efforts to remake itself after the Bernard Madoff fiasco. Though the two groups of cases were obscured by Judge… Continue Reading