The SEC fined and censured an investment adviser and its president/CIO for failing to implement compliance policies and procedures after the SEC noted principal transaction and best execution deficiencies during 2 separate exams. As part of the settlement, the respondent agreed to hire an experienced chief compliance officer and retain an independent compliance consultant. The SEC alleged that the respondent promised, but failed, to implement required principal transaction and best execution policies following SEC exams in 2006 and 2009. Even though the firm adopted policies and procedures, the SEC maintains that the firm violated those policies by continuing to engage in unlawful principal transactions and failing to monitor best execution.
OUR TAKE: Investment firms must hire a competent, experienced, and fully-engaged chief compliance officer to maintain and implement the compliance policies and procedures. The SEC will not accept mere lip service when it comes to regulatory compliance, especially when a firm does not follow through on specific undertakings made in response to deficiency letters.