More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The Securities and Exchange Commission has finished its investigation of Warren Buffett’s possible successor, David Sokol, regarding possible insider trading.
The Wall Street Journal reported Jan. 3 that the SEC has decided “not to take action,” according to Sokol’s attorney.
SEC spokesman John Nester declined to provide a comment on the matter to AdvisorOne, stating that any letter to terminate an investigation is not a public document.
The Journal reported that Barry Wm. Levine, Sokol’s lawyer, said he was informed on Jan. 3 that the SEC had wrapped up its investigation and decided not to take action.
“There has been a thorough legal analysis and factual scrutiny and the SEC has concluded, as we have always maintained, that David Sokol never did anything wrong," Levine told The Journal.
While Buffett has named his son Howard as his possible successor as chairman of Berkshire Hathaway, Sokol, Buffett’s former No. 2 at the company, was also considered a possible successor until it was discovered that he had bought millions of dollars in stock in Lubrizol Corp. before suggesting Buffett, the Berkshire CEO, buy the chemical company.
Sokol abruptly resigned in March 2011 after that news came to light.
As The Journal reports, at issue in the SEC investigation was Sokol's purchase of about $10 million worth of shares of Lubrizol, a stake that rose in value by about $3 million when Berkshire bought the company.
According to The Journal, Sokol first bought shares of Lubrizol in December 2010 and January 2011 after discussing the company with investment bankers. He subsequently recommended that Buffett buy the chemicals firm. Two months later, in March, Berkshire said it would acquire Lubrizol for $9 billion.
A 2011 report by the audit committee of Berkshire’s board concluded Sokol had misled Buffett about how he first heard about Lubrizol, The Journal says.
The SEC began investigating the investment shortly after Sokol resigned from Berkshire. Says The Journal report: “Buffett said at the time that Berkshire had turned over ‘very damning evidence’ about the purchases to the SEC.”