SEC targets advisers who inflate credentials

The agency is actively reviewing advisers' ADV forms for suspect information, according to speakers Thursday at a compliance conference hosted by National Regulatory Services

Oct 12, 2012 @ 3:09 pm

By Dan Jamieson

Advisers who inflate their education or credentials on ADV forms might get called out on it by the Securities and Exchange Commission.

The SEC is actively reviewing advisers' ADV forms for suspect information, according to speakers Thursday at a compliance conference hosted by National Regulatory Services.

“Some of the areas they're looking at are education, business background, disciplinary disclosures and credentials,” said Marilyn Miles, vice president at NRS. “They're not taking [those items] at face value anymore.”

Indeed, the SEC is independently confirming that individuals truly have the credentials they list on ADVs, said Martin Murphy, associate regional director for the SEC in Los Angeles.

“Credentials on the ADVs are sent out for accuracy,” he said.

“My understanding is that [the SEC is] taking a look at the claims of experience, and they're essentially running commercial background checks on those individuals,” said John Walsh, a partner a Sutherland Asbill & Brennan LLP, and a former SEC official in its examinations office.

“They're saying, 'OK, someone claimed they graduated summa cum laude. Well, did they really?'” Mr. Walsh said.

The agency is also using the internet and other filings to check registered individual's background information, said Ellyn Roberts, an attorney at Shartsis Friese LLP.

For example, SEC examiners are cross-checking business experience information listed on Form U-4s and comparing it to ADVs.

Advisers may have disclosed only advisory-related work on their ADVs, Ms. Roberts said, “and then the regulator comes in, and you've got all these other businesses” showing on the U-4.

Ms. Roberts said that so far, inconsistent disclosures of experience have not resulted in enforcement actions, “but I see a potential for embarrassment,” she said.


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