Published on Sep 18th, 2023 |

RIA Charged by the SEC for Repeat Compliance Failures

SEC Releases

Brief Introduction

A New York-based RIA was charged by the SEC for failing to adopt and implement written compliance policies and procedures, conduct an annual review of its compliance program, and establish, maintain, and enforce a written code of ethics.

The Firm consented to a cease-and-desist order, a censure, and a civil penalty of $100,000.

What Happened?

What Happened?

According to the SEC:

  • From 2006 to 2022, the RIA failed to adopt any written compliance policies or procedures that could reasonably prevent violations by advisers and supervised persons.
  • A 2006 examination performed by the SEC requested the RIA’s Employee Handbook and found that it was mostly related to HR policies and had no design to prevent violations of any relevant federal securities laws.
    • In response, the Division of Examinations wrote a deficiency letter with these findings requesting the Firm to make necessary changes and provide updated policies to the SEC.
  • Although a new Code of Ethics and Standards of Professional Conduct were provided by the Firm, by 2008 these documents no longer appeared in the Employee Handbook and no new policies with any reference to the Advisers Act could be found.
  • During an SEC examination of the Firm in 2021, these same deficiencies were discovered causing the Firm to retain a Compliance Consultant in 2022.

Vigilant's Conclusion

Vigilant’s Conclusion

Failing to implement written compliance policies and procedures, conduct an annual review of your compliance program, and/or enforce a code of ethics could bring the attention of the SEC and potentially result in financial penalties.

This situation highlights how important it is to properly remediate compliance deficiencies after an SEC Examination. However, the ideal situation would involve self-remediation of compliance deficiencies found during a gap analysis or a Mock SEC Exam.

Regardless, utilizing compliance professionals to help ensure written policies and procedures are up to industry standards is an important task for any Firm looking to be successful.

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