RIA Compliance BlogHighlighting the importance of properly handling clients’ personal information and complying with applicable fiduciary obligations, the Securities and Exchange Commission (SEC) reached a settlement last month that resulted in a final judgment brought against Parker Terrill Austin (“Austin”), an investment adviser based in California and founder of his advisory firm, Embarcadero Capital Advisors, Inc. (“Embarcadero”). The SEC filed its complaint in the U.S. District Court for the Central District of California on September 10, 2025.
Articles Posted in Enforcement
SEC Risk Alert Highlights Key Deficiencies in Annual Review
The SEC Division of Examinations recently issued a Risk Alert detailing examination observations regarding SEC-registered investment advisers’ (“advisers”) compliance with the annual review requirements under Rule 206(4)-7 of the Investment Advisers Act of 1940 (“Compliance Rule”). The Risk Alert serves as a reminder that an annual compliance review is more than a check-the-box exercise. Advisers should conduct a meaningful review of their compliance program, document the results, and address any deficiencies identified.
SEC Highlights Effective Compliance Controls for RIAs
The Securities and Exchange Commission (“SEC”) settled an administrative proceeding against Simplify Asset Management, Inc. (“Simplify”), a Delaware corporation and registered investment adviser that engages in transactions related to exchange-traded funds (“ETFs”), for multiple violations of the Investment Company Act of 1940 (the “Investment Company Act”). From July 2021 through November 2024, Simplify caused its ETF clients to violate multiple provisions of the Investment Company Act by failing to maintain and implement adequate compliance policies and procedures and by failing to adequately oversee certain regulatory requirements. The SEC has imposed a cease-and-desist order and a $400,000 civil money penalty, which Simplify must pay within 21 days of entry of the order.
SEC Enforces Timely SAR Filing Requirements
Highlighting the importance of timely filing of Suspicious Activity Reports (“SARs”), the Securities and Exchange Commission (“SEC”) entered a settled order against UBS Financial Services Inc. (“UBSFS”), a registered broker-dealer and investment adviser incorporated in Delaware and with its principal place of business in Weehawken, New Jersey. The SEC found that UBSFS failed to timely file certain SARs, in violation of Section 17(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 17a-8 thereunder. As part of the settlement, UBSFS agreed to cease and desist from committing or causing further violations of the relevant provisions, was censured, and agreed to pay a $20 million civil monetary penalty to the SEC within 30 days of entry of the order.
SEC Charge Investment Advisers with Misrepresenting AUM
Highlighting the importance of investment advisers’ proper calculation of assets under management (“AUM”), the SEC recently charged six investment advisers with misrepresenting their AUM.
The six connected firms, Bluesky Eagle Capital Management Ltd., Supreme Power Capital Management Ltd., AI Financial Education Foundation Ltd., AI Investment Education Foundation Ltd., Invesco Alpha Inc., and Adamant Stone Limited, were allegedly deficient in several areas, including claiming incorrect business addresses and falsely claiming to be public companies. AUM reporting, however, was the primary offense, as the cause of action was “making material misrepresentations in their SEC-filed Forms ADV that could not be substantiated.” While the advisers were allegedly engaged in several blatant forms of violative conduct, the SEC’s focus on their AUM misrepresentations underscores the importance of advisers’ proper calculation of AUM. Continue reading ›
FINRA Cracks Down on Form CRS Deficiencies
In a recent enforcement action that is significant to broker-dealers and investment advisers alike, FINRA continues to emphasize the importance of making full and accurate disclosures in customer relationship summaries (Forms CRS) and of following the Form’s instructions.
Last month, FINRA settled a case with J.K. Financial regarding Form CRS disclosures. The California based, SEC-registered broker-dealer agreed to FINRA’s settlement without admitting or denying its allegations.
Also known to investment advisers as Form ADV Part 3, Form CRS is a brief introduction to the broker-dealer or investment adviser, providing retail clients with highlights and conversation starters regarding the adviser. A key conversation starter is Item 4’s “Do you or your financial professionals have legal or disciplinary history?” Form CRS’s instructions require advisers to respond “Yes” if the firm or any of its financial professionals are required to disclose disciplinary history on any regulatory disclosure forms. Continue reading ›
Regulators Postpone and Withdraw Proposed Rules Impacting Investment Advisers
Both the SEC and the U.S. Department of the Treasury’s Financial Crime Enforcement Network (“FinCEN”) recently announced actions to delay or remove pending regulations that would have increased compliance obligations for RIAs. FinCEN announced that it was postponing the effective date of final rules regarding investment advisers’ obligations under anti-money laundering (“AML”) regulations. The SEC announced that it was withdrawing the proposed cybersecurity risk management rule for RIAs, investment companies, and BDCs. Continue reading ›
Minnesota RIA Charged with Cherry-Picking
The SEC recently settled cherry-picking charges against a Minnesota investment adviser and its sole owner. North East Asset Management Group and its owner, Gregory Zandlo, settled the Commission’s claims without admitting or denying its findings.
The SEC found that, through his firm, Mr. Zandlo shifted profitable trades to certain accounts from December 2020 through May 2022. Specifically, the SEC claimed the defendants were shifting profitable trades to accounts belonging to the firm, Mr. Zandlo, or people related to Mr. Zandlo (collectively, “Favored Accounts”). Continue reading ›
Investment Adviser Settles SEC Case on Model Security
The SEC recently charged New York-based investment advisers Two Sigma Investments LP and Two Sigma Advisers LP (collectively, “Two Sigma”) with breaching their fiduciary duties for failing to reasonably address known vulnerabilities in their investment models. In its Order, the SEC also found compliance and supervisory failures related to those violations, plus violation of the Commission’s whistleblower protections via Two Sigma’s employee separation agreements.
Two Sigma is a large quantitative-analytics-based hedge fund manager using computer-based algorithmic investment models when managing or advising client investments. The SEC claims that, by March 2019, multiple Two Sigma employees had informed senior management that various Two Sigma personnel could freely change variable inputs of their algorithmic models. These unchecked input modifications would alter the algorithm’s predictions and trades without notifying the firm, its representatives, or its clients. This autonomy of various personnel to rewrite the models’ data could materially impact investment decisions for Two Sigma clients. Continue reading ›
Advisers Who Did Not File 13F Reports Face SEC Scrutiny
Last month, the SEC announced a series of settled enforcement actions against investment advisers who routinely failed to file 13F and 13H reports with the Commission. The actions are tied to the SEC’s announced examination priority to assess the accuracy and completeness of regulatory filings.
Depending on the frequency, aggregate amount of transacted securities, types of securities, or value of securities an investment adviser advises, advisers registered with the SEC are subject to many filing requirements. Of these, the most common are the 13F and 13H reports required pursuant to Section 13 of the Exchange Act.