SEC charges investment advisors with Custody Rule violations
09 September 2022 US
Image: Andriy Blokhin
The Securities and Exchange Commission (SEC) has announced charges against a number of investment advisors that failed to comply with requirements relating to safekeeping client assets.
Investment advisers have also been charged for failing to provide timely updates to their SEC disclosures to reflect the status of audits of financial statements for the private funds they advised.
The advisers, all of which agreed to settle the SEC’s charges and pay combined penalties of over US$1 million, are BiscayneAmericas Advisers, Garrison Investment Group, and Janus Henderson Investors US.
Other investment advisers incorporated in SEC’s charges include Lend Academy Investments, Polaris Equity Management, QVR, Ridgeview Asset Management Partners, Steward Capital Management and Titan Fund Management.
Without admitting or denying the findings, the firms agreed to be censured, to cease and desist from violating their respective charged provisions, and to pay civil penalties, collectively totalling more than $1 million.
According to the SEC’s orders, certain advisers failed to have audits performed or to deliver audited financials to investors in certain private funds in a timely manner, thereby violating the Investment Advisers Act’s Custody Rule.
Certain advisers failed to promptly file amended Form ADV to reflect they had received audited financial statements after initially reporting that they had not yet received the audit reports.
Form ADV is the uniform form used by investment advisers to register with both the SEC and state securities authorities.
In addition, one adviser did not properly describe the status of its financial statement audits when filing its Form ADV, nor did it update its response in its Form ADV annual updating amendment for multiple years.
Gurbir Grewal, director of the SEC’s Enforcement Division, says: “Non-compliance with the Custody Rule creates significant risks for the safety and security of client assets. These actions show that the commission expects private fund advisers to meet their obligations to secure client assets and will pursue those who fail to do so.
“These matters also presented a unique circumstance for promptly resolving our investigations with this group of advisers. Counsel should not assume that the division will recommend similar resolutions going forward.”
C. Dabney O’Riordan, chief of the SEC Enforcement Division’s asset management unit, comments: “Registered private fund advisers’ failures to fulfill their reporting obligations make it harder for the SEC to identify firms with possible ongoing issues regarding the Custody Rule. It is critical for investor protection that private fund advisers update their filings with the SEC as required.”
Investment advisers have also been charged for failing to provide timely updates to their SEC disclosures to reflect the status of audits of financial statements for the private funds they advised.
The advisers, all of which agreed to settle the SEC’s charges and pay combined penalties of over US$1 million, are BiscayneAmericas Advisers, Garrison Investment Group, and Janus Henderson Investors US.
Other investment advisers incorporated in SEC’s charges include Lend Academy Investments, Polaris Equity Management, QVR, Ridgeview Asset Management Partners, Steward Capital Management and Titan Fund Management.
Without admitting or denying the findings, the firms agreed to be censured, to cease and desist from violating their respective charged provisions, and to pay civil penalties, collectively totalling more than $1 million.
According to the SEC’s orders, certain advisers failed to have audits performed or to deliver audited financials to investors in certain private funds in a timely manner, thereby violating the Investment Advisers Act’s Custody Rule.
Certain advisers failed to promptly file amended Form ADV to reflect they had received audited financial statements after initially reporting that they had not yet received the audit reports.
Form ADV is the uniform form used by investment advisers to register with both the SEC and state securities authorities.
In addition, one adviser did not properly describe the status of its financial statement audits when filing its Form ADV, nor did it update its response in its Form ADV annual updating amendment for multiple years.
Gurbir Grewal, director of the SEC’s Enforcement Division, says: “Non-compliance with the Custody Rule creates significant risks for the safety and security of client assets. These actions show that the commission expects private fund advisers to meet their obligations to secure client assets and will pursue those who fail to do so.
“These matters also presented a unique circumstance for promptly resolving our investigations with this group of advisers. Counsel should not assume that the division will recommend similar resolutions going forward.”
C. Dabney O’Riordan, chief of the SEC Enforcement Division’s asset management unit, comments: “Registered private fund advisers’ failures to fulfill their reporting obligations make it harder for the SEC to identify firms with possible ongoing issues regarding the Custody Rule. It is critical for investor protection that private fund advisers update their filings with the SEC as required.”
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