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How much should RIAs shake in their boots after the SEC punished three firms then put out a detailed press release?

Did the embattled agency go too far -- or not far enough?

Author Lisa Shidler November 30, 2011 at 5:50 AM
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Brian Hamburger: If anything it's sending the message that the SEC is not putting a high price tag on the cost of maintaining an ongoing compliance program.

RIA Compliance

Bill Winterberg

Bill Winterberg

December 1, 2011 — 5:29 PM


These firms, and lets pick on OMNI, had the heads up that enforcement was likely in their future. In 2007, the SEC issued a deficiency letter for OMNI’s failure to conduct an adequate annual compliance reviews.

Then in May 2011 (and why it took the SEC nearly four years to follow up is anyone’s guess), OMNI received a subpoena from the SEC for documents related to the absent CCO’s work. The SEC discovered signatures on provided documents were backdated.

So, yeah, OMNI is an easy case for the SEC to set an example and fine registered investment advisers for skirting compliance obligations.

It’s not like the SEC fined an RIA for possessing login information to clients’ 401(k) accounts and failing to disclose custody of said account assets on their Form ADV.

Bill Winterberg

Bill Winterberg

December 1, 2011 — 5:30 PM

And in a related story, Bill Singer has an excellent follow-up at Forbes on the matter:

<a rel="nofollow">http://www.forbes.com/sites/billsinger/2011/11/29/sec-fishing-for-compliments-look-at-our-new-proactive-regulation-of-rias/</a>

Jeff McClure

Jeff McClure

December 2, 2011 — 11:38 PM

Brooke: We all do it? Nah. I can say with complete confidence that if the SEC audits my firm and finds deficiencies we will work hard to correct them, and will assume that the examiners will be back to look at exactly those issues. I can also assure you that when the SEC tells us we need to have a written set of procedures we do, and we will do our best to follow them.

As for Mr. Gil… Well, since the SEC was good enough to write him up and let him go on doing business and then when they came back he still was ignoring the rules, well… If he considered that the SEC would take that seriously as a surprise his contribution to the gene pool may not be all positive.

I have been to many a conference, including the ones put on by the local SEC examiners. In every single conference where the SEC had a representative to speak, he or she warned that a failure to address a deficiency so that it became apparent on the follow-up visit that the warning was being ignored would result in an enforcement action. Where is the surprise here?

The article seems to suggest that the SEC might just swoop down on some unsuspecting advisory firm, discover that there were misspelled words in some document and promptly throw everyone in jail. I have found the SEC examiners and staff to be quite willing to bend over backward to assist and train as long as they got the sense we were trying to get things right. On the other hand examiners have warned that as soon as they sensed deceit, deception, or out and out lies, the firm doing those things would become a target.

That attitude makes good sense to me. It beats the heck out of FINRA’s focus on type size and being sure to have properly labeled empty files.

Related Moves

October 4, 2023 at 2:16 AM

Mentioned in this article:

MarketCounsel | HamburgerLaw
Compliance Expert, RIA Set-up Firm, Regulatory Consultant
Top Executive: Brian Hamburger

The Law Offices of Patrick J. Burns, Jr., P.C.
Specialized Breakaway Service
Top Executive: Patrick J. Burns, Jr., Esq.

Advanced Regulatory Compliance, LLC
Compliance Expert
Top Executive: Patrick J. Burns, Jr., J.D.

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