SEC Cracks Down On Deficient Investment Advisers

Actions and Fines on "technical issues" are on the rise, according to a recent article in Investment News.

Even worse for investment advisers, now the stakes appear to be much higher, as what used to be cause for a deficiency letter now is cause for levying fines and bringing formal enforcement actions.

This isn't just SEC posturing. Consider two cases: Hutchens Investment Management, Inc, and Capital-Works Investment Partners LLC.

In Hutchens, the SEC enforcement filed its complaint against both the firm and its owner, alleging that they had not fully complied with their solicitation, trading and record-keeping responsibilities.

Likewise, in Capital-Works, the SEC brought and settled an enforcement action against the firm and one of its partners who had directed compliance for their failing to have written compliance policies in place. The SEC fined the firm $40,000 and the partner $25,000.

While both cases involved deficiencies that previously had been noted, but not corrected, clearly the environment has changed for investment advisers. As one commentator said, the SEC now takes the view that "close enough isn't good enough with compliance."

Source: Investment News, June 12, 2006