Home » aum

Tag: aum

Non-U.S. Adviser Lied on Form ADV

The SEC censured and barred from the industry the principal of a non-U.S.-based investment manager for making false Form ADV statements.  The SEC charges the firm with falsely claiming (i) to have over $100 Million in assets under management, (ii) to have retained a nationally recognized auditor and prime broker for its funds, and (iii) a principal place of business in the United States, which was only a virtual office.  The SEC alleges that the Form ADV statements violated the antifraud rules of both the Securities Act and the Investment Advisers Act.  The SEC asserts jurisdiction because the respondents used interstate electronic communications to further the fraud.  The SEC claims proper venue because the defendants maintained a virtual office in New York. 

Form ADV is a securities law filing that gives rise to antifraud liability for misstatements.  The regulators will not overlook untruths as innocent marketing exaggerations.  Hire a lawyer or compli-pro to help prepare an accurate Form.   

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

SEC Accuses Adviser of Falsely Inflating AUM to Register

The SEC instituted enforcement proceedings against an adviser that it accuses of falsely claiming SEC registration eligibility.  The SEC alleges that the adviser initially registered by claiming that it had over $500 Million in assets under management and a year later changed its ADV to claim eligibility as a mid-sized adviser ($25-$100 Million AUM) domiciled in New York and/or Wyoming.  However, the SEC maintains that the adviser never had any clients or assets under management.  The SEC further accuses the adviser of soliciting clients using the false ADVs.

OUR TAKE: SEC registration has become a qualifying criterion for larger clients who feel more secure with an SEC-regulated firm that has more than $100 Million in AUM.  Consequently, firms may feel the pressure to stretch their numbers to qualify, which could result in a painful enforcement action.  There is no shortcut to success.