Compliance Solutions for Investment Advisers

SEC Charges Three Firms With Violating Custody Rule

 The Securities and Exchange Commission today sanctioned three SEC-registered investment advisory firms for violating the “custody rule” that requires them to meet certain standards when maintaining custody of their clients’ funds or securities.

SEC investigations following referrals by agency examiners found that New York-based Further Lane Asset Management, Massachusetts-based GW & Wade, and Minneapolis-based Knelman Asset Management Group failed to maintain client assets with a qualified custodian or engage an independent public accountant to conduct surprise exams.  The firms also committed other violations of the federal securities laws.  Each firm has agreed to settle the SEC’s charges.

“The heart of the relationship between advisers and their customers is the safety of client assets.  Surprise exams or procedures associated with audited financial statements provide additional safeguards against assets being stolen or misused,” said Andrew Ceresney, co-director of the SEC’s Division of Enforcement.  “These firms failed to comply with their custody rule obligations, and other firms who hold client assets should take notice that we will vigorously enforce such requirements.”

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