The SEC today announced that it is charging the mayor of Beaufort, South Carolina with insider trading on non-public information he obtained while doing consulting work for a California biotechnology firm. According to the SEC, the individual was given information about new technology. The information was provided in confidence and had not been made publicly available. Shortly after receiving the information, the individual purchased shares in the company that would have netted more than $20,000 had he sold out. The individual agreed to pay $20,708 in disgorgement, $2,576 in prejudgment interest, and a $20,708 penalty.
Category Archives: SEC
Single Family Office Not Required to Register with SEC
July 09, 2008
The SEC recently granted an order under Section 202(a)(11)(G) of the Investment Advisers Act of 1940 (“Advisers Act”) declaring that a particular “family office” and its employees, when acting within the scope of their employment, are not required to register as investment advisers pursuant to Section 203(a) of the Advisers Act. The SEC granted this order because it found that the applicant and its employees are not within the intent of Section 202(a)(11) of the Advisers Act which defines the term “investment adviser”. Section 202(a)(11)(G) allows the SEC to designate by rule, regulation, or order that certain persons are not within the intent of the definition of an “investment adviser.”
The U.S. Securities and Exchange Commission (SEC) has been examining certain recently registered investment advisers by conducting limited scope, one-day examinations. According to the SEC’s cover letter sent in advance of these audits, “the purpose of these examinations is to assess and discuss important risk areas presented be the registered investment advisers’ operations and the related compliance policies and procedures implemented by the registered investment advisers to manage those risks.”
Lori Richards Provides Insight to SEC Exam Focus
May 05, 2008
On March 20, Lori Richards, Director – SEC’s Office of Compliance Inspections and Examinations, delivered a speech explaining the SEC’s current registered investment advisor examination priorities. The speech highlights the “top 10” areas of focus during routine examinations. While not an official statement from the SEC, Ms. Richards’ speech provides excellent insight into the current mindset of the SEC Office of Compliance Inspections and Examinations.
Summary of SEC’s Newly Proposed Form ADV Part 2
March 09, 2008
RIA Compliance Consultants, Inc. intends to submit formal comments to the U.S. Securities and Exchange Commission (“SEC”) regarding proposed changes to Part 2 of Form ADV. The “re-proposed” changes were announced earlier this month after an initial attempt to change Part 2 of Form ADV was made in 2000. RIA Compliance Consultants is encouraging registered investment advisers to read the proposed rule release and provide their own comments. Comments must be received by the SEC on or before May 16, 2008. The proposed rule release can be viewed on the SEC’s website at http://www.sec.gov/rules/proposed.shtml. Clients of RIA Compliance Consultants can also forward their comments to us for inclusion into our comment letter. Comments should be sent to RIA Compliance Consultants by April 30, 2008.
Although the recent report concerning possible insider trading by a public pension plan administrator conducted by the Division of Enforcement of the U.S. Securities and Exchange Commission (“SEC”) involves an essentially unregulated money manager which is not subject to the Investment Advisers Act of 1940, it still offers an excellent opportunity for each registered investment adviser to review its policies and procedures regarding trading activity based upon material, non-public (“insider”) information.
The U.S. Securities and Commission (“SEC”) released today a proposed rule amending Regulation S-P, which includes an exception from the privacy notice and opt-out requirements so as to permit the release of certain customer contact information to the customer’s representative when departing his or her current SEC registered investment adviser or broker-dealer and joining a new firm.
Proposed Amendments to Reg S-P Permits Limited Transfer of Information When IARs Change Firms
March 05, 2008
At its open meeting today, the U.S. Securities and Exchange Commission (“SEC”) voted to propose several amendments to Regulation S-P, which sets forth the privacy obligations of registered investment advisers and broker-dealers with respect to confidential client information.
In January of this year, the SEC entered bar and cease and desist orders against a two member registered investment advisor firm. The firm was owned by a husband and wife with the wife serving strictly in an administrative capacity. The law judge in the case found that the registered investment advisor had willfully violated the Investment Advisers Act of 1940 because it falsely represented to the SEC that it had assets under management (AUM) exceeding $25 million in order to remain eligible for SEC registration. The inflated AUM numbers were reported on several Form ADV Part 1 amendments from 1996 through 2000. The SEC terminated the firm’s registration in 2002. However, the firm continued to hold itself out to the public as an investment advisor and reported its AUM numbers through several database services. The reporting of those numbers were also found to be intentionally inflated and therefore misleading. Further, the firm was not able to provide documentation substantiating its AUM and performance numbers. The firm claimed all paperwork and client files were lost in a fire and then claimed the paperwork was lost in flood. To read the entire order click here.
SEC Considering a New Form ADV Part 2 at Its February 13th Meeting
February 07, 2008
The U.S. Securities and Exchange Commission (“SEC”) announced today that the SEC Commissioners will consider at the SEC’s open meeting on February 13, 2008 whether to propose amendments to the Part 2 of the Form ADV under the Investment Advisers Act of 1940.
