SEC Takes Action against IRA Custodian
The SEC has commenced enforcement proceedings against an IRA custodian for causing securities laws violations committed by two clients who have been indicted for securities fraud. The SEC alleges that the custodian’s salespeople helped sell the fraudulent investments by attending seminars and vouching for its clients, ignoring documentation red flags, and disregarding concerns raised by its own compliance department. Although the custodian is a state-chartered trust company, the SEC assumes jurisdiction pursuant to Section 8A of the Securities Act, which allows it to seek a cease-and-desist order against any person that is the cause of another person’s securities law violations.
OUR TAKE: Applying this same legal theory, the SEC can use Section 8A against any firm in a gatekeeping role including lawyers, auditors, fund administrators, and custodians.