More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- How to Avoid Sabotaging Your Compliance Exam There is much more to compliance examination survival than knowing all of the rules. It helps to understand why the rules were put in placeand to recognize that examiners are not the enemy.
The Securities and Exchange Commission’s Asset Management Unit charged David Dube and his firm, Peak Wealth Opportunities, on Friday with failing to provide SEC examiners with records of a mutual fund advisory business that invested in NASCAR-related stocks.
The SEC examiners sought records from Dube and his Florida-based wealth management firm while examining a mutual fund they advised called the Stock Car Stock Index Fund. Despite repeated requests, the SEC says that Dube and Peak Wealth failed to furnish certain records to the SEC.
“After promising multiple times to provide the requested records, Dube failed to live up to his regulatory obligations and turn over the records,” said Bruce Karpati, chief of the Enforcement Division’s Asset Management Unit, in a statement. “When financial professionals fail to cooperate with SEC exams, they force the agency to expend greater resources to pursue investigations.”
According to an SEC order initiating administrative proceedings, Peak Wealth was the advisor to the Stock Car Stock Index fund from 2008 to June 2010. SEC examination staff requested records from Peak Wealth and Dube in 2010 while examining Peak Wealth’s advisory business and the operations of the fund.
The SEC further alleges that Dube and Peak Wealth:
- Failed to make and keep certain required financial records.
- Failed to withdraw Peak Wealth’s registration with the SEC and make other required filings.
- Failed to provide the fund’s board of directors with information reasonably necessary to assess Peak Wealth’s advisory fees.
Simultaneously with the SEC’s examination in 2010, the fund’s board requested information from Peak Wealth and Dube as part of the fund’s required annual evaluation of its advisory agreements. “Despite requesting additional time to respond to the board, Peak Wealth and Dube failed to provide any of the requested documents. The board subsequently terminated Peak Wealth’s advisory agreement and liquidated the fund by returning the money to investors,” the SEC states.
“A fully informed board is crucial to the advisory fee setting process, yet Dube failed to provide the board with the most basic of information,” said Chad Alan Earnst, an assistant regional director in the Enforcement Division’s Asset Management Unit.
Under the relevant rules, the SEC says that it could seek to permanently bar Dube from association with an SEC-registered investment advisor or broker-dealer.