The Securities and Exchange Commission (SEC) has charged nine investment advice companies in the US for several breaches of custody and filing rules.
Of the nine, two have been charged with custody rule violations, one for Form ADV breaches– the form required for investment advisers to register with both the SEC and state securities authorities – and six companies charged with violating both regulations.
The regulator said the firms “failed to comply with requirements relating to safekeeping client assets and/or to timely update their SEC disclosures to reflect the status of audits of financial statements for the private funds they advised”.
All companies have agreed to settle the SEC’s charges and to pay combined penalties of over $1m (£862,120, €994,730).
The nine companies and their respective charges and fines are:
- BiscayneAmericas Advisers, breach of custody rule and failure to amend Form ADV – $135,00 penalty;
- Garrison Investment Group, violation of both provisions – $330,000 fine;
- Janus Henderson Investors US, breach of custody rule – $150,000 penalty;
- Lend Academy Investments, violation of both provisions – $75,000 fine;
- Polaris Equity Management, custody rule violation – $50,000 penalty;
- QVR, failure to amend Form ADV – $50,000 fine;
- Ridgeview Asset Management Partners, breach of both provisions – $70,000 penalty;
- Steward Capital Management, violation of both provisions – $75,000 fine; and
- Titan Fund Management, breach of both provisions – $95,000 penalty.
Details
According to the watchdog’s orders, certain advisers failed to have audits performed or to deliver audited financials to investors in certain private funds in a timely manner and, as a result, they violated custody rules.
Additionally, some advisers failed to promptly file amended Form ADVs to reflect that they had received audited financial statements. One adviser did not properly describe the status of its financial statements audits when submitting its Form ADV nor did it update its response in the annual amendments for several years, as required.
“Non-compliance with the custody rule creates significant risks for the safety and security of client assets,” said Gurbir Grewal, director of the SEC’s enforcement division. “These actions show that the commission expects private fund advisers to meet their obligations to secure client assets and will pursue those who fail to do so.
“These matters also presented a unique circumstance for promptly resolving our investigations with this group of advisers. Counsel should not assume that the division will recommend similar resolutions going forward.”
Dabney O’Riordan, chief of the SEC enforcement division’s asset management unit, added: “Registered private fund advisers’ failures to fulfil their reporting obligations make it harder for the SEC to identify firms with possible on-going issues regarding the custody rule. It is critical for investor protection that private fund advisers update their filings with the SEC as required.”
