SEC Charges 5 Advisory Firms With Custody Rule Violations

According to the SEC’s orders issued Tuesday, the five firms failed to do one or more of the following: have audits performed; deliver audited financials to investors in a timely manner; and/or ensure a qualified custodian maintained client assets.

In addition, two of the firms failed to promptly file amended Forms ADV “to reflect they had received audited financial statements, and one of the firms did not properly describe the status of its financial statement audits for multiple years when filing its Form ADV,” the SEC said.

Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, said Tuesday in a statement that the Custody Rule and the associated Form ADV reporting obligations “are core to investor protection. We will continue to ensure that private fund advisers meet their obligations to secure client assets.”

Without admitting or denying the findings, the firms agreed to be censured, to cease and desist from violating the respective charged provisions, and to pay civil penalties ranging from $50,000 to $225,000, the SEC said.

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