The punishment meted out to the three firms involves paying financial penalties and setting up of a series of corrective measures to settle the SEC’s charges.
According to the SEC’s "compliance rule", all registered investment advisors must adopt and implement written policies and procedures to prevent, detect, and correct securities law violations. The SEC adopted this initiative to "proactively prevent investor harm by working closely with agency examiners to ensure that viable compliance programs are in place at firms".
The three firms facing the charges are Omni Investment Advisors, Feltl & Company, and Asset Advisors.
In fact two of the firms, Utah-based Omni and Michigan-based Asset Advisors, had received warnings from the SEC, which they ignored. The SEC has also charged Omni’s owner, Gary Beynon, chief compliance officer based in Brazil, of failing to perform his compliance responsibilities.
Beynon has been fined with a US$50,000 penalty and has been permanently barred from acting within the securities industry and from associating with any investment company. Apart from this the firm, as part of the settlement, will have to provide a copy of the proceeding to all of its former clients between September, 2008 and August, 2011.
Minneapolis-based Feltl has been fined with US$50,000 penalty and under SEC agreement it will have to return more than US$142,000 to certain advisory clients. The SEC has also instructed the firm to hire an independent consultant to review its compliance operations annually for the next two years.
As for Michigan-based Asset Advisors, the firm will have to pay a US$20,000 penalty, cease operations, de-register with the SEC, and move its advisory accounts to a firm with an established compliance program.
Robert Kaplan, co-chief of the SEC Division of Enforcement’s Asset Management Unit said that the failure to adopt and maintain adequate compliance policies and procedures is termed as violation of the federal securities laws.
"We will continue to work with our counterparts in the national exam program to identify investment advisors that put their investors at risk by failing to take their compliance obligations seriously," he added.