SEC Blames Weak Compliance Program for IPO Disclosure and Allocation Missteps
The SEC sanctioned the adviser to a mutual fund family
for allocating IPOs to the complex’s smaller funds without adequately
disclosing the allocation policy or risks.
Significantly, the SEC blamed the firm’s failures on an inadequately
resourced compliance program. The SEC
alleges that the CCO, who had little compliance experience, also served as the
COO and the CFO and had little staff support despite requests for additional
resources. The SEC did not charge the
CCO but asserts that the respondent violated Rule 206(4)-7 for failure to
“provide its compliance program with adequate resources in a timely manner.”
OUR TAKE: The SEC stresses the need to properly resource
the compliance function. The
significance of this particular action is the SEC specifically asserting that a
better compliance program would have prevented the underlying violation.