The Massachusetts Securities Division (the “Division”) recently issued a policy statement in which it stated, “It is the position of the Division that fully automated robo-advisers, as currently structured, may be inherently unable to carry out the fiduciary obligations of a state-registered investment adviser.” According to the Division, robo-advisers are…
The Securities Exchange Commission (“SEC”) recently filed suit against a North Carolina investment adviser for allegedly defrauding investors in the sale of certain real estate-related investments in unregistered pooled investment vehicles. The adviser, Richard W. Davis Jr., solicited investors primarily from the Charlotte, North Carolina region and was able to…
Last month, the Financial Industry Regulatory Authority (“FINRA”) suspended an Ameriprise registered representative for one year and fined him $50,000 for altering a record in the client relationship management (“CRM”) software that the adviser used in his Ameriprise office. This enforcement case points to the dangers for broker-dealer representatives and…
Chief Compliance Officers (“CCOs”) play an important role in registered investment adviser firms, as they are responsible for ensuring the firm is developing adequate compliance programs and following its compliance policies and procedures. In the past, the Securities Exchange Commission (“SEC”) has generally avoided second-guessing the professional judgment of CCOs.…
The Securities Exchange Commission (“SEC”) recently released a no-action letter allowing sub-advisers in certain situations to avoid the annual surprise examination requirement of Rule 206(4)-2 for investment advisers with custody of client funds or securities. Going forward, sub-advisers who do not have actual custody of client assets but are deemed…
Earlier this month, the Securities and Exchange Commission (“SEC”) instituted an administrative proceeding against Blue Ocean Portfolios, LLC (“Blue Ocean”), an SEC-registered investment advisor with approximately $106 million in regulatory assets under management, and its Principal, CEO and Chief Compliance Officer, James A. Winkelmann, Sr. According to the allegations, Blue…
The Securities Exchange Commission (“SEC”) Office of Investor Education and Advocacy recently released an investor bulletin educating investors on investment performance claims in investment adviser advertising and pointing out specific things they should consider prior to investing. This bulletin and newsletter highlight the increasing emphasis regulators have been placing on…
Last month, the Securities and Exchange Commission (“SEC”) brought and simultaneously settled administrative proceedings against accounting firm Santos, Postal & Co. P.C. (“SPC”) and one of its accountants, finding that SPC and the accountant conducted deficient surprise audits of investment adviser SFX Financial Advisory Management Enterprises (“SFX”). The surprise examinations…
Last month the Securities and Exchange Commission (SEC) instituted and simultaneously settled an administrative enforcement case in which a civil penalty of $225,000.00 was assessed against Cambridge Investment Research Advisors, Inc. (Cambridge). The action illustrates the importance of designing and implementing effective heightened supervision programs for investment adviser representatives who…
The Financial Industry Regulatory Authority (“FINRA”) recently released guidance on effective practices for financial services firms that provide digital investment advice services. While the report analyzed rules of the securities industry that relate to such services, it discusses effective practices that “may be valuable to financial professionals generally,” including registered…