SEC Says BD WSPs Do Not Satisfy Adviser Compliance Obligations
The SEC sanctioned an investment adviser for compliance failures that included using broker-dealer written supervisory procedures as an adviser compliance manual. The SEC charged the adviser with violations of the compliance rule (206(4)-7) for failing to adopt and implement reasonable compliance policies and procedures. The SEC alleged that the firm’s compliance policies and procedures were adopted virtually verbatim from the principal’s former broker-dealer employer, except for global search-and-replace terms (e.g. “investment adviser” for “registered representative”, “client” for “customer”). The purported compliance manual did not reference the Advisers Act or the adviser’s fiduciary duty. The firm also failed to conduct the required annual compliance review. The SEC also alleged that the firm lied about its assets under management and failed to keep required books and records. As part of the settlement order, the firm agreed to deliver the enforcement order to all clients and post it on its website. The principal of the firm was barred from the industry for at least 2 years.