The word on the street is that the Securities and Exchange Commission is preparing for a new wave of enforcement that will specifically target investment advisers. As we noted in a recent blog post, there are signs that the commission has already stepped up its enforcement activities. Three advisory firms were charged with having inadequate or nonexistent compliance programs, resulting in over $250,000 in fines and reimbursement.
“An enforcement wave is coming,” said Jordan Thomas, former assistant director at the Securities and Exchange Commission’s asset management unit. “The world is about to change for investment advisers.”
The SEC’s latest crackdown follows a recent SEC report that revealed that the commission filed a record 146 actions against investment advisers in fiscal 2011, a 30% increase over the previous year. Those efforts were part of 735 enforcement actions overall, which was also a record. Overall, the SEC ordered $2.8 billion in penalties and repayments to investors.
Why Is the SEC Targeting Advisers?
The SEC is placing a special emphasis on enforcement in the investment management industry because investment advisers are the portal to the financial markets for so many investors, according to Robert Kaplan, co-chief of the SEC’s asset management unit. The unit is one of five national specialized investigative units established in January 2010 in the SEC’s enforcement division.
Advisers should be aware that the unit is concentrating on asset valuation, performance and ADV misrepresentation, disclosure of conflicts of interest, and compliance infrastructure, according to Mr. Kaplan.
Source: Investment News
How We Can Help
An SEC enforcement action can have a significant impact on any adviser or advisory firm. In many cases, a negative press release issued by the SEC can be just as damaging as any monetary fines and penalties.
Therefore, it is important for advisers to take compliance seriously. That means doing more than just paying lip service, but rather developing compliance procedures and policies, appointing compliance staff, and regularly monitoring their effectiveness.
Eckerle Law offers a highest-quality and cost-effective alternative to the traditional law firm model for a wide variety of transactional and regulatory matters serving all your business law needs. Our experienced attorneys also provide a full range of compliance services for investment advisers, offering compliance tools that are tailored to fit the ever changing regulatory landscape as well as your business needs.
If your company would like to strengthen its business practices, please contact us today so we can leverage our experience to create real-life business and legal solutions to help your business thrive.