Published on Sep 6th, 2023 |

5 Advisory Firms Charged for Custody Rule Violations

SEC Releases

Brief Introduction

On September 5th, the SEC announced charges against five investment advisers for Custody Rule violations.

The SEC requires compliance with the Custody Rule and the Form ADV reporting obligations as a core protection for investors.

Ranging from $50,000 to $225,000 in individual fines, the total amount charged was over $500,000.

Who Does This Affect?

Who Does This Affect?

  • Registered Investment Advisers (“RIAs”)

What Happened?

What Happened?

  • Safekeeping Failures
    • While all five Firms were charged for Safekeeping Failures, three of the Firms were also charged for failing to update SEC Disclosures.
    • The Firms failed to perform at least one or more of the requirements:
      • Have audits performed.
      • Deliver audited financials to investors in a timely manner.
      • Ensure a qualified custodian maintained client assets.
  • Disclosure Failures
    • Two Firms failed to promptly file an amended Form ADV to reflect their audited financial statements.
    • One Firm improperly described the status of its financial statement audits for multiple years.

Vigilant's Conclusion

Vigilant’s Conclusion

This is the second charge the SEC has filed during their sweep investigations related to the Custody Rule and Form ADV requirements.

It is vital that Firms are prepared for SEC investigations through a Gap Analysis or Mock SEC Examination.

Reach out to Vigilant to inquire about your Firm’s compliance with the Custody Rule and Form ADV requirements.

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