Chief Compliance Officer Fined and Barred from Industry
The SEC fined and barred a registered adviser’s Chief Compliance Officer for multiple compliance failings including overstating assets, approving misleading marketing materials, and filing inaccurate Form ADVs.
The SEC accuses the CCO, her firm, and the firm’s principal, with overcharging a significant client by overstating performance, thereby collecting more than $300,000 in unearned performance fees. Additionally, the firm’s Form ADV and marketing materials claimed that the firm managed several hundred million dollars in assets when total assets under management were less than $25 Million. Consequently, the firm violated the Advisers Act by registering with the SEC even though it was not eligible. The SEC also faults the respondents for failing to disclose negative financial information including an unpaid judgment and arbitration and the loss of its biggest client. In charging the CCO, the SEC noted that she had no prior securities industry experience and that the firm’s 12-page compliance manual lacked significant policies and procedures. The SEC has charged the CCO with aiding and abetting the firm’s multiple compliance violations.
We are generally not big fans of charging the Chief Compliance Officer directly when a firm violates the Advisers Act. However, assuming the accuracy of the SEC’s allegations, this compliance officer acted with such complete disregard of her obligations that she appears to have even failed to make a good faith attempt at compliance. Instead, she merely appears to have assisted her boss in his illegal activities.
Read SEC Order here.