Compliance News

SEC Examiners Will Look at Whistleblower Rules Compliance

The Dodd-Frank Act established a whistleblower program that authorizes the SEC to reward individuals who voluntarily provide the Commission with original information about a violation of federal securities laws. Before the Dodd-Frank Act was passed, the SEC’s authority to compensate whistleblowers was limited to insider trading cases. A whistleblower is defined as any individual who provides the SEC with original information related to a possible violation of federal securities law that has occurred, is about to occur, or is ongoing.

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Risky Business and Employees Can Put RIAs on SEC’s Radar

Delray Beach, Fl – November, 2016 – When the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) announced its priorities for 2016, the Commission warned that higher-risk Registered Investment Advisers (“RIAs”) were more likely to be examined. Focusing on high-risk firms enables the SEC and state securities regulators to make the most effective use of their resources. Firms that pose the greatest threat to retail investors and individuals saving for retirement are likely to be on the SEC’s radar.

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RIAs Pay the Price for False Performance Claims

Delray Beach, Fl – October, 2016 – On August 25, 2016, the SEC announced penalties against thirteen Registered Investment Advisers (“RIAs”) that violated securities laws by disseminating false performance claims made by F-Squared Investments, an investment management firm. The SEC conducted an enforcement sweep of RIAs and found that these thirteen firms did not question F-Squared’s claims that its AlphaSector strategy had outperformed the S&P 500 index for a number of years. The firms passed along the performance claims made by F-Squared to investors without substantiating the results.

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“Over-exaggeration” and Other Advertising Compliance Problems

Delray Beach, Fl – September, 2016 – An Olympic swimmer recently admitted that he “over-exaggerated” his story about being robbed after a night of celebration in Rio. “Over-exaggeration,” or any exaggeration for that matter, is just one of many misstatements that can cause an investment adviser’s advertisements to be noncompliant.

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Form ADV Disclosure Deficiencies Mislead Investors and Regulators

Delray Beach, Fl – August, 2016 – The Form ADV Part 2 disclosure brochure is a narrative that must be written in plain English. The disclosure brochure describes a firm’s advisory services, compensation, experience, conflicts of interest, investment strategy, and a wealth of other important information. Recent enforcement actions demonstrate that the SEC will sanction Registered Investment Advisers (“RIAs”) that fail to make full and accurate disclosure in their firms’ Form ADV.

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