SEC Pursues “Independent” RIA for Failing to Disclose Payments
The SEC has instituted enforcement proceedings against a registered investment adviser that marketed its independence even though it received over $200,000 in undisclosed payments from a third-party adviser it recommended. According to the SEC, the respondent required payments from a third party adviser as a pre-condition to recommending that clients move with him to his new firm. The respondent booked the revenue as a “Marketing and Syndication Fee.” The SEC alleges that the respondent’s marketing materials touted the firm’s independence and client-focused recommendations, but the firm failed to disclose the payments received.
OUR TAKE: Rule 206(4)-3 specifically requires disclosure of adviser solicitation payments by the payor. The SEC asserts here that the firm that receives payments also has a disclosure obligation. Also, firms must make sure that their marketing claims comport with their actual practices.