CCO Sanctioned for Misleading ADV 

The Chief Compliance Officer of a registered investment adviser was fined and censured for preparing and filing a Form ADV that failed to disclose the firm’s true control persons.  According to the SEC, the firm’s control persons capitalized and set up the RIA through nominees because their broker-dealer did not permit a hybrid operating model that allowed for reps to operate their own RIA.  The SEC asserts that the principals exercised management and control by participating in quarterly board meetings, contributing to personnel decisions, serving on the investment committee, and making marketing decisions.  The SEC alleges that the CCO knew that the principals operated through nominees yet did not disclose their control relationship in Item 10 of Form ADV, Part 1, or Item 10 of Part 2.

OUR TAKE: It is a violation of the Advisers Act to make false statements or omit material misstatements on Form ADV.  The SEC does not take kindly to firms that knowingly lie on their disclosure documents.  And, the staff will not hesitate to prosecute the individuals that prepare the misleading documents.

http://www.sec.gov/litigation/admin/2014/34-72515.pdf