Are your disclosures (or lack of) going to get you in trouble?
The SEC initiated an effort several years back, mandating companies to come forward if they had neglected to adequately and transparently reveal their conflicts of interest when choosing pricier mutual fund share classes for their advisory clients. This undertaking permitted companies to voluntarily disclose any wrongdoing and reimburse affected investors.
This initiative of self-reporting allowed these firms to avoid a civil penalty by the Commission. Those firms that didn’t take part in the initiative were issued orders against them by the SEC. Here are two such firms. See Mid Atlantic Financial Management Inc. (ordered to pay $1,027,002 in disgorgement and prejudgment interest and a $300,000 civil penalty) and BPU Investment Management Inc. (ordered to pay $692,107 in disgorgement and prejudgment interest and a $235,000 civil penalty). As of mid-April, the SEC was settling their final cases of orders issued on self-reporting.
This should be a lesson to all firms to be sure you are checking and double checking the marketing materials you are putting out as advertising, and those that your advisors are advertising as well. Is your compliance in check? Do you feel confident this will not be you? Did you think self-reporting firms avoiding the civil penalty and charges were better off? Those firms were still paying out hundreds of thousands of dollars.
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Author Bio
Leila Shaver is the Founder of My RIA Lawyer, a law firm that provides compliance and legal consulting for financial institutions. With extensive experience as a securities attorney and compliance expert, she has served as Chief Compliance Officer and General Counsel to RIAs, BDs, and TAMPs with billions in assets under management.
Leila understands the challenges RIAs face and is committed to helping RIAs streamline their processes, mitigate risks, and ensure compliance with regulatory requirements. She received her Juris Doctor from Atlanta’s John Marshall Law School and is a West Georgia Young Lawyers’ Association member. Leila has received numerous accolades for her work, including the Carroll County Bar Association’s Outstanding Young Lawyer Award in 2017.