Internet Adviser Failed to Provide Required Books and Records to Exam Staff
The SEC commenced enforcement proceedings against a purported internet adviser for failing to produce books and records requested during an examination. The examination staff made several attempts to obtain information, including emails and phone calls. The defendant said that he saw the email requests but didn’t read them and then repeatedly ignored SEC communications. The SEC also charges the defendant with filing with the SEC even though it did not qualify because it had no clients and did not provide investment advice.
You can’t just blow off the SEC examination staff. In our experience, the staff is usually very accommodating and will provide extensions if you can’t meet specific deadlines. But, it’s a bad move to abuse their goodwill. In this case, the defendant got caught in a regulatory pincer: he violated the law by registering with the SEC even though the firm didn’t qualify and then brought down the regulatory thunder once he registered and subjected his firm to examination.