Adviser Fails to Supervise Employee Who Allegedly Forged Checks

April 21, 2013

The SEC brought an administrative action against Vector Wealth Management, LLC, finding that from October 2008 to May 2011, a clerical employee of Vector forged checks to misappropriate $33,147 of dividends owed to four advisory clients participating in two hedge funds that were managed by Vector.


Although Vector had custody of the hedge fund assets, Vector did not arrange to have the quarterly account statements or audited annual financial statements for the hedge funds distributed to the clients who invested in them, and Vector was not subject to an annual surprise examination.  Vector’s policies and procedures also were not reasonably designed to prevent violation of the Custody Rule, and Vector failed to conduct an annual review of the adequacy and effectiveness of its compliance policies and procedures. Finally, throughout the relevant period, the SEC alleged that Vector failed reasonably to supervise the clerical employee with a view to preventing and detecting the employee’s violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

Click here to access the administrative action.


Categories

Enforcement Actions, Investment Advisers, Investment Companies