Compliance Solutions for Investment Advisers

Important Lessons for SEC Advisers

Sometimes investment advisers busted by the SEC for intentional actions can offer lessons for their more law-abiding brethren. Two actions against investment advisers and certain of their executives are a case in point. One firm allegedly engaged in thousands of principal transactions through an affiliated brokerage firm without informing their clients. The other firm and its CCO were also charged with violations of the custody rule and failure to adopt a compliance program reasonably designed to ensure compliance with the federal securities laws, as required by Rule 206(4)-7.

These cases are further evidence that the SEC is focused on investment adviser compliance in the following areas:

  • conflicts of interest;
  • principal transactions;
  • the custody rule; and
  • the need to adopt and maintain compliance programs designed to prevent violations of the federal securities laws.
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