SEC Targets Investment Advisers With Previously Identified Exam Deficiencies

The SEC has sanctioned three investment advisory firms for repeatedly ignoring problems with their compliance programs.

The enforcement actions arise from the agency’s Compliance Program Initiative, which targets firms that have been previously warned by SEC examiners about compliance deficiencies but failed to effectively act upon those warnings.  Had the problems been addressed, the firms could have prevented their eventual securities law violations.  The SEC Enforcement Division’s Asset Management Unit has coordinated with examiners to bring several cases since the initiative began two years ago.

Andrew Bowden, director of the SEC’s National Exam Program, said, “After SEC examiners identified significant deficiencies, these firms did little or nothing to address them by the next examination.  Firms must fix deficiencies identified by our examiners.”

For instance, the SEC’s order against a firm referred to as MPM and its owners finds that they failed to correct ongoing compliance violations at the firm despite prior warnings from SEC examiners.  In particular, they failed to complete annual compliance reviews in 2006 and 2009 and made misleading statements on MPM’s website and investor brochure.  For instance, one location on MPM’s website misleadingly represented that the firm had more than $600 million in assets.  However, on its Form ADV filing to the SEC during that same time period, it reported that the firm’s assets under management were $359 million or less.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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