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SEC Charges Dual Registrant with Deficient Compliance Infrastructure

SEC Charges Dual Registrant with Deficient Compliance Infrastructure


On December 12th, 2018, the Securities and Exchange Commission (the “SEC”) released an Administrative Order to Cease and Desist against a dually registered investment adviser/broker-dealer and its sole principal (collectively, the “Adviser”).  The SEC sanctioned these individuals for violations of the Investment Advisers Act of 1940 (the “Advisers Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”).

According to the SEC, the Adviser breached its fiduciary duty to clients by receiving undisclosed financial compensation by overcharging clients for “confirmation fees.”  Under Section 206(2) of the Advisers Act, advisers cannot use any means or instrumentality of interstate commerce to engage in any transaction, practice, or course of business that operates as a fraud or deceit upon any client or prospective client.

In addition, the SEC charged the Adviser with a failure to adopt written policies and procedures that governed best execution.  Under Section 203 of the Advisers Act, advisers cannot provide investment advice unless, (1) a chief compliance officer is designated; (2) an annual review is conducted; and (3) a set of policies and procedures (typically known as the Compliance Manual and Code of Ethics) has been adopted.

The SEC ordered the Adviser to cease and desist, to be censured, and to jointly and severally pay disgorgement and civil penalties totaling nearly $600,000.


The Adviser took remedial action by retaining a third-party compliance consultant, engaging in compliance training, and by adopting revised policies and procedures reasonably designed to prevent future violations of federal securities laws.

If you have any questions about the requirements of the Advisers Act or policies and procedures governing best execution, please reach out to Fairview directly.  Fairview is committed to ensuring its clients’ compliance programs are robust and compatible with SEC regulations.