A day after Securities and Exchange Commission Chairwoman Mary Jo White told compliance officials that the agency was cracking down on advisors who fail to fix shoddy compliance programs, the agency announced sanctions against three advisory firms for “repeatedly” ignoring such problems.
The enforcement actions, which were brought as a result of the agency’s multipronged Compliance Program Initiative, targets firms that have been previously warned by SEC examiners about compliance deficiencies but failed to effectively act upon those warnings.
The two-year old Compliance Initiative is a multipronged effort by the Enforcement Division’s Asset Management Unit, examination staff and Investment Management Division.
The firms charged Wednesday — Modern Portfolio Management, Equitas Capital Advisers and Equitas Partners — have agreed to settlements in which they will pay penalties and hire compliance consultants.
What Your Peers Are Reading
“The Compliance Program Initiative is designed to address repeated compliance failures that may lead to bigger problems,” said Andrew Ceresney, co-director of the SEC’s Division of Enforcement, in a statement announcing the actions. “That risk materialized with these firms, whose compliance programs were not adequate to prevent misleading statements in marketing materials or inadvertent overbilling of clients. Firms must not only have policies and procedures in place, but also need to properly implement those policies and procedures.”
The SEC provided a detailed description of each action.
The SEC’s order against Modern Portfolio Management (MPM) and its owners G. Thomas Damasco II and Bryan Ohm finds that they failed to correct ongoing compliance violations at the firm despite prior warnings from SEC examiners. In particular, they failed to complete annual compliance reviews in 2006 and 2009 and made misleading statements on MPM’s website and investor brochure.