SEC Prosecutes RIA for Weak Compliance Program
The SEC censured and fined a registered investment adviser because it failed to implement an adequate compliance program as required by the Advisers Act compliance rule (206(4)-7). The SEC cited several violations: (i) using a template manual without tailoring it to the firm’s business; (ii) failing to conduct adequate best execution reviews; (iii) designating compliance personnel that either did not devote sufficient time to compliance and/or had insufficient knowledge and training; (iv) failing to conduct adequate employee training; (v) filing incorrect ADVs; (vi) not enforcing an adequate Code of Ethics; and (vii) failing to deliver the Form ADV to clients.
OUR TAKE: Last year, the SEC promised that it would bring more compliance program failure cases. Firms should note that this case, like many other compliance program cases, does not allege any client harm or underlying Advisers Act violation.