More On Legal & Compliancefrom The Advisor's Professional Library
- U.S. Securities and Exchange Commission Information This information sheet contains general information about certain provisions of the Investment Advisers Act of 1940 and selected rules under the Advisers Act. It also provides information about the resources available from the SEC to help advisors understand and comply with these laws and rules.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
Independent Portfolio Consultants (IPC) has transferred 1,400 client accounts worth over $1 billion away from troubled broker-dealer Jesup & Lamont Securities Corp. to the broker-dealer subsidiary of Clearbrook Financial, according to a Tuesday, August 10, news release.
The deal closed just two months before the Financial Industry Regulatory Authority Inc. (FINRA) suspended New York City-based Jesup & Lamont in July for failure to comply with a net capital rule. With its ability to make money essentially shut down by FINRA, Jesup & Lamont has seen both clients and advisors scurry for the exits. Efforts to reach Jesup & Lamont were unsuccessful; the firm's website is no longer publicly available. FINRA's BrokerCheck lists regulatory action taken against Jesup for compliance violations.
Clearbrook Financial's subsidiary, Managed Account Services (MAS), will provide broker-dealer and administrative services for IPC, including trade and clearing support, fund and asset transfer, regulatory, and related services. IPC client assets will continue to be custodied with First Clearing LLC, an affiliate of Wells Fargo Bank.
"The transfer occurred in May, and account conversion is now complete. It was incredibly smooth," said Clearbrook Managing Principal John Morris in a phone interview. "All IPC clients were notified of the transfer, and no clients had any complaints."
Morris added that his firm "didn't know anything that was going on" with Jesup & Lamont's compliance issues.
"We started discussing the opportunity to win that business with IPC in the second and third quarter of 2009," he said. "Some of the things we heard was that that there wasn't a symmetry between their customers , their custodian, and themselves as far as the pricing....Sometimes if you're not happy with a firm--and [Jesup] took some shortcuts in the way they negotiated contracts to get business--it's a sign of things to come. That's the lesson learned. For us, everything you read about us or see on our website is about transparency and alignment of interests."
Headquartered in Boca Raton, Florida, Independent Portfolio Consultants is a privately owned firm of 35 employees with over 600 clients and assets under management totaling $1.5 billion as of December 31, 2008.
"The selection of Clearbrook was based on their extensive knowledge of the managed account industry, their depth of experience in regulatory compliance and risk management, and the opportunity to leverage their institutional asset management research and due diligence," IPC Director Alan Bush said in a statement. "We have been pleased with the smooth transition of our clients' assets and the Clearbrook team in completing the transition."
Headquartered in Princeton, New Jersey, Clearbrook is an independent investment advisory firm whose core business is to provide investment advice and solutions. As of Wednesday, August 11, Clearbrook had more than $30 billion in client assets under advisement and more than $2 billion in client assets held through its broker-dealer subsidiary MAS.