Adviser Charged with Failing to Implement Adequate Compliance Procedures

April 21, 2013

The SEC brought an administrative action against Foxhall Capital Management, Inc., based in Virginia, alleging that the firm willfully violated, and its CEO, Co-Chief Investment Officer and CCO willfully aided and abetted and caused Foxhall to violate Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder by failing to adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act. Foxhall, according to the SEC, also failed to keep complete and accurate records as required by Section 204 of the Advisers Act and Rule 204-2(a)(3) thereunder, and its CCO aided and abetted and caused Foxhall’s violations of these provisions.

According to the SEC, from at least January 2007 through September 2009,  Foxhall, with the CCO failed to follow its stated policies and procedures in its compliance manual; failed to maintain adequate records of its trading; and failed to timely conduct the required 2007 annual compliance review.

The SEC also found that Foxhall’s trading management system did not interface properly with its primary broker-dealer and custodian’s trading platform which caused Foxhall to not always have the most up-to-date information about its client account balances.  As a result, when trades were placed, certain clients did not have sufficient funds in their accounts to purchase their allocated shares within the larger block trade.  When those client accounts could not purchase their shares due to insufficient funds, Foxhall’s practice was to reallocate these shares to other clients who were within the same investment model portfolio.  However, it did so without regard as to whether the share price increased or decreased from the date of the original trade.  Foxhall also did not maintain complete and accurate records concerning the process it followed when clients had insufficient funds to receive the allocated shares and its decision to reallocate shares to other clients.

Click here to access the administrative action.


Enforcement Actions, Investment Advisers, Investment Companies