The SEC ordered nine investment advisory firms to pay a total of more than $1 million for failing to safeguard client money in private funds they advise.
The Securities and Exchange Commission charged the firms with violating the agency’s custody rule, which sets out requirements that advisers who hold client assets must follow to prevent their loss, misuse or misappropriation.
The nine firms managed private funds. Personnel from the firms also held positions with the funds that gave them control over client assets invested in the funds, a situation that constitutes custody of the client funds.
The SEC alleged that some of the firms failed to have audits conducted of the funds or did not deliver audited financial statements to investors. Some of the firms also did not update their Form ADVs when they received audited financial statements for the funds. All of those missteps are custody violations.
The advisory firms settled with the SEC and agreed to pay civil penalties that totaled more than $1 million. The firms are Biscayne Americas Advisers ($135,000), Garrison Investment Group ($330,000), Janus Henderson Investors ($150,000), Lend Academy Investments ($75,000), Polaris Equity Management ($50,000), QVR ($50,000), Ridgeview Asset Management Partners ($70,000), Steward Capital Management ($75,000) and Titan Fund Management ($95,000).
The enforcement action comes as the SEC has stepped up its scrutiny of private funds.
“Non-compliance with the custody rule creates significant risks for the safety and security of client assets,” SEC Enforcement Director Gurbir S. Grewal said in a statement. “These actions show that the Commission expects private fund advisers to meet their obligations to secure client assets and will pursue those who fail to do so. These matters also presented a unique circumstance for promptly resolving our investigations with this group of advisers. Counsel should not assume that the Division will recommend similar resolutions going forward.”
The firms did not admit or deny the SEC’s findings. Lawyers representing the firms did not respond to requests for comment.
The SEC is trying to gain better insight into private funds, whose assets under management are soaring, according to the agency.
“Registered private fund advisers’ failures to fulfill their reporting obligations make it harder for the SEC to identify firms with possible on-going issues regarding the custody rule,” C. Dabney O’Riordan, chief of the SEC Enforcement Division’s Asset Management Unit, said in the statement. “It is critical for investor protection that private fund advisers update their filings with the SEC as required.”
Wealth Consulting Group, Coastline and Maridea report fresh capital, acquisitions and asset growth as advisor M&A keeps climbing
Carson Group's Dani Fava, Jason Pereira of Woodgate Financial, and Sally George of Convergency Partners led the raise as the growth-tech startup builds out its AI platform and leadership bench.
New teams from William Blair, Ameriprise and UBS bring more than $560 million in combined client assets to the firm's employee and independent channels.
Regulators this year approved UBS Bank USA’s conversion to a nationally chartered bank.
How a subprime lender’s car-loan bonds allegedly unraveled before bankruptcy.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
