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Day: April 9, 2018

Adviser Lacked Required AUM to Register with the SEC

The SEC fined and suspended the principal of a defunct investment adviser for falsely claiming SEC registration eligibility.  The firm claimed that it had at least $25 Million in assets under management through 2011 and then suddenly claimed it had at least $100 Million assets under management following passage of the Dodd-Frank in 2012.  The SEC asserts the firm had no basis for claiming SEC registration eligibility because it did not have the purported assets under management.  The SEC also alleges violations of the custody rule arising from the firm’s role as a private fund manager.

OUR TAKE: Lying to the SEC about registration eligibility is more than mere marketing puffery.  It can prompt a public enforcement action.  Make sure you have records to support the claimed assets under management.

https://www.sec.gov/litigation/admin/2018/ia-4875.pdf