Co-owners of Sands Brothers Asset Management LLC along with the advisory firm’s former chief compliance officer agreed Thursday to settle year-old charges levied by the Securities and Exchange Commission that the firm was repeatedly late in providing investors with audited financial statements of its private funds.

Sands Brothers Asset Management and co-founders Martin Sands and Steven Sands agreed to pay a $1 million penalty and to be suspended for a year from raising money from new or existing investors. 

The firm also must have a compliance monitoring firm for three years. 

Former CCO Christopher Kelly, who also served as chief operating officer, agreed to pay a $60,000 penalty and will be suspended for one year from acting as a CCO or appearing or practicing before the SEC as an attorney, the agency said.

The SEC’s custody rule requires firms to obtain independent verification of assets when they can access or control client money or securities so investors know they are protected from misuse or theft.

In 2010, Sands Brothers and its co-founders also faced an enforcement action for custody rule violations and agreed to settle the charges by paying a $60,000 penalty. 

The SEC instituted an administrative proceeding in October 2014 after the agency’s Enforcement Division alleged the firm was repeatedly late in providing investors with audited financial statements of its private funds.

The Thursday agreement settles those charges.

“There is no place for recidivism in the securities markets,” said Andrew Calamari, director of the SEC’s New York Regional Office, said in a Thursday statement. “The Sands brothers missed their opportunity to right a previous wrong and instead merely repeated their custody rule violations, so now they face more severe consequences.”  

Without admitting or denying wrongdoing, Martin and Steven Sands consented to the SEC’s order finding that the firm violated the custody rule and the brothers caused and willfully aided and abetted the violations. 

Kelly neither admitted nor denied the charges while consenting to an SEC order finding that he caused and willfully aided and abetted the firm’s custody violations. 

— Check out For Compliant Advisors, Known (and Unknowable) Unknowns on ThinkAdvisor.