SEC Brings Charges Against Investment Advisers For Compliance Failures

November 28, 2011

The SEC charged three investment advisers for failing to have in place compliance procedures designed to prevent securities law violations.  The SEC stated that the Asset Management Unit of its Enforcement Division worked closely with examiners from OCIE, the SEC’s inspection arm, to review compliance programs at advisory firms in connection with these matters.


The three advisory firms are:

  • Utah-based OMNI Investment Advisors Inc.
  • Minneapolis-based Feltl & Company Inc.
  • Troy, Mich.-based Asset Advisors LLC.

    The SEC also brought charges against OMNI’s owner Gary R. Beynon, who served as the firm’s chief compliance officer

In two of the cases – OMNI and Asset Advisors – SEC examiners previously warned the firms about their compliance deficiencies.

According to the SEC, OMNI failed to adopt and implement written compliance policies and procedures after SEC examiners informed OMNI of its deficiencies.  Between September 2008 and August 2011, OMNI had no compliance program and the SEC found that its advisory representatives were completely unsupervised.  Beynon assumed the chief compliance officer responsibilities in November 2010 while living abroad.

The SEC further found that OMNI failed to establish, maintain, and enforce a written code of ethics, and failed to maintain and preserve certain books and records.  In response to a subpoena, OMNI produced client advisory agreements with Beynon’s signature evidencing his supervisory approval when, in fact, Beynon had never reviewed the agreements.  Beynon backdated his signature on those agreements one day before the documents were produced to the SEC.

Feltl & Company failed to adopt and implement written compliance policies and procedures, including failing to adopt a code of ethics and collect the required securities disclosure reports from its staff.  As a result of its compliance failures, the SEC stated that Feltl engaged in hundreds of principal transactions with its advisory clients’ accounts without informing them or obtaining their consent as required by the Advisers Act.   The SEC also found that Feltl also improperly charged undisclosed commissions on certain transactions in clients’ wrap fee accounts.

The SEC found Asset Advisors initially failed to adopt and implement a compliance program.  After SEC examiners brought it to the firm’s attention, Asset Advisors adopted policies and procedures but never fully implemented them.  Similarly, the SEC stated that Asset Advisors only adopted a code of ethics at the behest of the SEC exam staff and then failed to adequately abide by the code.

Click here for the OMNI administrative action.

Click here for the Feltl administrative action.

Click here for the Asset Advisors administrative action.


Categories

Enforcement Actions, Investment Advisers