More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- 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 SEC announced Monday the appointment of Julie Riewe and Marshall Sprung as co-chiefs of the Division of Enforcement’s asset management unit, succeeding Bruce Karpati, who led the unit as a co-chief since its January 2010 inception but who left the commission in May.
Since May 2012, both Riewe and Sprung had been serving as deputy chiefs of the unit, whose charter, according to the SEC, is to focus “on misconduct by investment advisers, investment companies and private funds.”
Riewe (right), who joined the SEC in 2005, and Sprung, who joined the SEC in 2003, became deputy chiefs following the departure of the Asset Management Unit’s original co-chief, Robert Kaplan.
In an interview with AdvisorOne after he joined the law firm Devevoise & Plimpton on June 1, 2012, Kaplan argued that “the single most significant trend in securities enforcement today is the increased allocation of resources to misconduct by investment advisors.” At that time, the unit comprised 75 lawyers and industry experts who focused on investigations related to potential violations of securities laws by advisors to hedge funds, private equity funds, mutual funds and separately managed accounts.
Kaplan said the unit had been “unprecedented in its success,” which he attributed to hiring more staff members with industry expertise, the unit’s focus on proactively identifying misconduct earlier, and “breaking down silos” by collaborating with other SEC divisions.
According to the SEC’s release announcing the new appointments, both Riewe and Sprung have already contributed significantly to the Asset Management Unit’s actions.
Riewe, the commission said, has “spearheaded notable investigations that resulted in enforcement actions” against an RIA who used social media to peddle fraudulent securities, against proxy advisory firm Institutional Shareholder Services (ISS) for failing to safeguard proxy voting information, and against two advisors at Oppenheimer & Co. (not affiliated with OppenheimerFunds) whose firm “failed to value portfolio assets in accordance with its disclosed valuation methodology.”
Sprung (right) played a central role, the commission said, in successful enforcement actions against AXA Rosenberg in 2011, and last year against former hedge fund advisory firm Yorkville Advisors for exaggerating the reported returns of hedge funds it managed in order to hide losses and increase investor fees.
New Director for Legislative and Intergovernmental Affairs
Also on July 1, the commission announced the appointment of Timothy Henseler as director of the office of legislative and intergovernmental affairs, with responsibility for advising the SEC chairman, commissioners and staff on legislative matters, for liasing with congressional committees and staff, and in preparing testimony for congressional hearings. Henseler joined the SEC in 2003 in its Boston office, was formerly the deputy director of the office and has been acting director since July 2012; before joining the commission, Henseler served on the staff of Sen. Carl Levin (D-Mich.) from 2001 to 2003.
Check out SEC, FINRA Enforcement: StateTrust Investments Fined for Corporate Bond Fraud on AdvisorOne.