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Day: December 2, 2019

Adviser and CCO Son Were Unaware of Advisers Act


The U.S. District Court for the Northern District of Illinois ordered an investment adviser to pay over $1.8 Million in disgorgement and penalties for multiple violations of the Investment Advisers Act.  The SEC asserts the adviser ignored the Advisers Act’s custody, recordkeeping, valuation, and disclosure rules while commingling assets and engaging in insider transactions.  When confronted with the deficiencies following an SEC exam, the firm’s principal said that he was unaware of the existence of the Investment Advisers Act or the duties it imposed upon the firm and its principals.  The founder’s son who served as Chief Compliance Officer was barred from the industry earlier this year.

Ignorance of the law is no excuse, and naivete will not insulate a Chief Compliance Officer from liability.  When operating in a regulated industry, failure to retain competent regulatory advisers will result in a date with a federal judge.