SEC Sanctions Six Investment Advisers Over Compliance
Recent enforcement actions targeting compliance and custody-rule violations signal a heightened SEC focus on the investment adviser community.
The SEC has brought and settled administrative proceedings against six registered investment advisers (RIAs) in a late-October enforcement sweep, signaling a significant new focus. Three firms were sanctioned for compliance program deficiencies under Advisers Act Rule 206(4)-7, with violations including the failure to conduct annual reviews and making misleading statements in marketing materials and Form ADV. Three other advisers were sanctioned for violating the custody rule, which requires specific controls to protect client assets. These actions align with recent public statements from SEC officials that its Office of Compliance Inspections and Examinations (OCIE) would target the investment adviser community. The sanctions included significant fines and undertakings, such as hiring third-party compliance consultants and notifying clients of the violations. Counsel should advise RIA clients to proactively review their compliance policies and custody arrangements in anticipation of heightened regulatory scrutiny.