I have been saying for a long time,
that the SEC is getting serious sending cases to enforcement as it relates to
the investment advisers, hence hedge funds and private equity funds. On November 28, 2011 The Securities and
Exchange Commission charged three investment advisers for failing to put in
place compliance procedures designed to prevent securities law violations.
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| Unbelievable |
The cases stem from an initiative
within the SEC Enforcement Division’s Asset Management Unit to proactively
prevent investor harm by working closely with agency examiners to ensure that
viable compliance programs are in place at firms. Investment advisers are
required by law to adopt and implement written compliance policies and
procedures.
When SEC examiners identify deficiencies in a firm’s compliance
program, those deficiencies need to be corrected before they lead to other
securities law violations that could harm investors. Investment advisers that
essentially ignore SEC examination warnings risk being the subject of SEC
enforcement actions.
So in two of the cases — OMNI and
Asset Advisors — SEC examiners previously warned the firms about their
compliance deficiencies. Why and how
these two Firms did not remediate these deficiencies or think that the SEC
would not take these infractions to enforcement is mindboggling. Carlo
di Florio, Director of the SEC’s Office of Compliance Inspections and
Examinations, added, “When SEC examiners identify compliance deficiencies,
firms are expected to remediate them. The Commission will take enforcement
action against registrants that fail to do so.”
“Not all compliance failures result
in fraud, but many frauds take root in compliance deficiencies,” said Robert
Khuzami, Director of the SEC’s Division of Enforcement. “That simple truth underlies our renewed focus on identifying and
charging firms and individuals that fail their legal obligations to maintain
adequate compliance programs.”
“The failure to adopt and maintain
adequate compliance policies and procedures is a significant violation of the
federal securities laws,” said Robert Kaplan, Co-Chief of the SEC Division of
Enforcement’s Asset Management Unit. “We will continue to work with our
counterparts in the national exam program to identify investment advisers that
put their investors at risk by failing to take their compliance obligations
seriously.”
