More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
C.S. Capital Management Inc. of Atlanta, Ga., formerly known as Chadwick, Saylor & Co., and owner Paul H. Saylor have been ordered to restore $1.09 million to the Plumbers and Pipefitters National Pension Plan as restitution for improperly investing $25 million in risky private placement bonds. The firm also was ordered to pay $109,990.91 in fines to the federal government.
The U.S. Department of Labor announced on Monday that it had obtained a consent order against the firm, which had been hired by the plan to evaluate and make a recommendation on the purchase of bonds. The plan covers more than 123,000 participants around the country; the bonds were to finance the Playa Vista development project in Los Angeles, Calif.
The Labor Department filed a lawsuit simultaneously with the order in the U.S. District Court for the Northern District of Virginia in Alexandria. The suit alleges that Saylor and the firm violated the Employee Retirement Income Security Act(ERISA)by the purchase of the bonds.
The bonds were purchased in 1998; the issuer has only made a single interest payment, in 2001, and has made no payments since.
The suit also alleges imprudent action by the defendants in purchasing the Playa Vista B bonds, which it says have an unduly low rate of return compared to the risk assumed by the plan, and by purchasing bonds that subordinated the plan's investment to that of Playa Vista A bondholders.
Secretary of Labor Hilda L. Solis said in a statement, “These defendants violated their duty to responsibly manage the plan's investments. Our goal is to return money improperly managed and invested so it can be available to pay pension benefits.”