On July 23, 2019 the Office of Compliance Inspections and Examination’s (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) released a Risk Alert about its assessment of the oversight practices of SEC-registered investment advisers who employ or employed individuals with disciplinary histories. Of the over 50 advisers that were examined, nearly all of the examined advisers received deficiency letters. The OCIE exams did not focus solely on supervisory practices as they relate to the individuals with prior disciplinary histories. Instead, OCIE reviewed the advisers’ supervisory practices firm-wide. OCIE’s findings relate to all investment advisers regardless of whether they have someone with a disciplinary history. The deficiencies identified related to compliance and disclosure issues, including undisclosed conflicts of interest.
On July 1, 2019 the United States Securities and Exchange Commission (“SEC”) filed an order instituting administrative cease-and-desist proceedings to an investment adviser firm for allegedly failing to disclose material conflicts of interest.
September 06, 2018
The U.S. Securities and Exchange Commission (“SEC”) recently announced that it has settled charges with an investment adviser firm. The SEC alleged that the investment adviser failed to disclose a conflict of interest. The settlement ended in payment of $8.9 million to the SEC by the investment adviser.
August 31, 2017
The U.S. Office of Management and Budget (“OMB”) recently approved a request by the U.S. Department of Labor (“DoL”) that seeks to postpone implementation of the final portion of the DoL’s controversial fiduciary rule. Originally scheduled to go into effect January 1, 2018, this newest proposal by the DoL would see the fiduciary rule delayed eighteen more months, until July 1, 2019. Click here to view the regulatory review update on the OMB’s website.
A registered investment advisor has a fiduciary duty to disclose all real and potential conflicts of interests to clients as well as all material arrangements. Often times this broad requirement encompasses outside business activities the registered investment advisor considers non-advisory and would otherwise not disclose to clients. For example, a registered investment advisor that spends only 10% of its time on investment advisory activities and 90% of its time on non-advisory activities is required to disclose this fact. It must be made clear to all clients that the registered investment advisor will not devote all of its time to investment advisory functions unlike other registered investment advisor firms whose only activity is acting as an investment advisor.
November 07, 2008
The U.S. Securities and Exchange Commission (“SEC”) recently issued an order bringing sanctions against an individual who had served as an investment adviser’s president and chief compliance officer regarding investment pools operated by an associated person of the investment adviser.
October 06, 2008
Recently, FINRA published a webcast on identifying and handling conflicts of interest. Conflicts of interest may arise any time that the interests of a registered representative or investment advisory representative compete with the interests of their customers. This post will summarize the FINRA webcast, as conflicts of interest is an important issue that affects both registered representatives affiliated with a broker-dealer only, as well as investment advisory representatives affiliated with a registered investment adviser.
SEC Issues Cease-and-Desist Order for Failure to Disclose Conflicts of Interest and Misrepresentation of Its Research Process
July 16, 2008
Recently, the U.S. Securities and Exchange Commission (“SEC”) issued a cease-and-desist order, disgorgement to clients, prejudgment interest and penalties, among other sanctions against a registered investment adviser for its failure to disclose conflicts of interest in its selection of funds for discretionary clients and for providing misrepresentations to clients by stating that funds selected for model portfolios were chosen according to the firm’s approved research process.
September 22, 2007
Once again the U.S. Securities and Exchange Commission (“SEC”) issued a cease-and-desist order against a registered investment adviser for incomplete disclosure of a conflict of interest in violation of Section 207 of the Investment Advisers Act of 1940.