The Securities and Exchange Commission has fined Meridian Financial, an RIA in Massachusetts, $75,000 and ordered the firm to conduct an annual review in 30 days for violations related to the agency's Marketing Rule.
Meridian failed to comply with provisions of the Advisers Act concerning marketing, recordkeeping, the implementation of compliance policies and procedures and conducting an annual compliance review.
Specifically, according to the SEC's order, Meridian disseminated an advertisement in which it claimed it “refuse[d] all conflicts of interest,” without providing any context for this claim.
Meridian separately recognizes "various conflicts of interest inherent in the role as an investment adviser, including conflicts of interest disclosed in its Form ADV Part 2A brochure," the order states.
"As a result, Meridian lacked a reasonable basis to believe that it would be able to substantiate the claim that it refused all conflicts of interest upon demand by the Commission" in violation of the Marketing Rule.
Meridian also failed to maintain copies of ads that appeared on its website, and failed to implement its policies and procedures concerning the reliance on third parties for recordkeeping and conducting annual compliance reviews.
Compliance Manual Failures
"Although Meridian relied on a third party to maintain copies of the advertisements that were on Meridian’s website, Meridian did not obtain a contractual undertaking requiring the third party to provide a copy of the documents promptly upon request, as required by Meridian’s compliance manual," the SEC order states.
Meridian also failed to conduct an annual review of the adequacy of its compliance policies and procedures and the effectiveness of their implementation, and failed to comply with the annual review requirements set forth in its compliance manual.
"In 2023, Meridian’s annual review was incomplete and limited to a cursory review of Meridian’s Form ADV," the order states.
"Although Meridian knew its annual review had not yet been completed, Meridian made no effort to complete the process," the SEC said. "Meridian’s compliance manual specifies that the annual review must review the firm’s policies and procedures to assess their effectiveness in light of the business Meridian conducts, any changes in the Advisers Act or other applicable rules, and any compliance matters that arose during the previous year."
Meridian’s compliance manual requires the evaluation and testing of both the efficacy and implementation of Meridian’s written policies and procedures, according to the order.
"Meridian failed to implement these policies and procedures for its 2023 annual review, which involved only a review of Meridian’s Form ADV," the order states.
In 2024, Meridian conducted an annual review with the assistance of a compliance consultant.
"However, the 2024 annual review did not assess the adequacy of Meridian’s policies and procedures, as the review assessed a stale version of the compliance manual that was no longer operative and did not capture the requirements of the Marketing Rule," the SEC said.
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