Nine investment advisers fined in SEC crackdown on custody regulation
Securities and Exchange Commission (SEC) regulations intended to safeguard client funds and/or promptly disclose financial updates following audits were broken by nine investment advisors, the agency reported on Friday.
In accordance with separate agreements with the SEC, BiscayneAmericas Advisers, Garrison Investment Group, Janus Henderson Investors, Lend Academy Investments, Polaris Equity Management, QVR, Ridgeview Asset Management Partners, Steward Capital Management, and Titan Fund Management will collectively pay more than $1 million in fines.
According to the SEC, two of the advising companies—Polaris and Janus Henderson—violated custody laws, one—QVR—failed to submit Form ADV, and six businesses were fined for breaking both laws. The businesses received a reprimand and a directive to stop operating without acknowledging or disputing the findings.
According to the SEC, the custody rule, which is a component of the Investment Advisors Act, mandates that advisers who have custody of clients' money or securities adhere to certain guidelines in order to avoid the theft, loss, or misappropriation of such assets.
According to the agency, some of the advisers who broke the guideline neglected to do the necessary audits or failed to promptly inform investors of the audit results. After first informing the agency that they had not received audited financial statements, several advisers delayed filing an updated Form ADV with the SEC to demonstrate that they had. The SEC claimed that one adviser's Form ADV "did not properly describe the status of its financial statement audits" and that it failed to update the yearly revision to the form for a number of years.
According to Gurbir Grewal, director of the SEC's Enforcement Division, "noncompliance with the custody rule creates significant risks for the safety and security of client assets. 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."
According to Grewal, the SEC made the uncommon decision to quickly resolve its investigations with the advisors. He warned: "Counsel should not assume that the division will recommend similar resolutions going forward."
Garrison will pay the highest fine of the investing companies, totaling $330,000.
According to the SEC's order, Garrison failed to give its customers timely access to the yearly audited financial statements of some of the pertinent private funds it was managing in 2018 and 2019. According to the government, Garrison delayed 11 months before updating its Forms ADV after audits. The SEC said that the business also broke the custody regulation in 2020 and 2021.
Garrison was unavailable for comment.
With a $150,000 fine, Janus Henderson got the second-highest punishment of the bunch. According to a Janus Henderson representative, the SEC discovered the business failed to deliver audited financial statements to 10% of investors in one private fund during a three-year period.
Less than 20 institutional clients were impacted, according to the spokesperson's statement in an email. According to the spokesman, the company has increased control to avoid "future delays in the distribution of statements" and has worked closely with the SEC.
By fLEXI tEAM