SEC Penalizes Investment Advisers for Compliance Failures

November 28, 2011

The SEC charged three investment advisers for failing to put in place compliance procedures designed to prevent securities law violations.  The cases stem from the SEC Enforcement Division’s Asset Management Unit’s initiative to proactively prevent investor harm by working with agency examiners to ensure viable compliance programs are in place.


The firms charged are Utah-based OMNI Investment Advisors Inc., Minneapolis-based Feltl & Company Inc., and Troy, Mich.-based Asset Advisors LLC. The SEC also charged OMNI’s owner Gary R. Beynon, who served as chief compliance officer.  The firms will pay financial penalties and institute a series of corrective measures to settle the charges.

Rule 206(4)-7 of the Investment Advisers Act requires registered investment advisers to adopt and implement written policies and procedures reasonably designed to prevent, detect, and correct securities law violations. The Rule requires annual review of the policies for adequacy and effectiveness, and designation of a chief compliance officer to administer the policies.

According to the SEC’s order, OMNI Investment Advisors failed to adopt and implement written policies and procedures after the SEC informed OMNI of deficiencies.  Between September 2008 and August 2011, OMNI had no compliance program and its advisory representatives were completely unsupervised.  Beynon acted as chief compliance officer in November 2010 while living abroad.  OMNI failed to establish, maintain, and enforce a written code of ethics, and failed to maintain and preserve certain books and records.  Under the settlement, Beynon agreed to pay $50,000, and to be permanently barred from acting within the securities industry in any compliance or supervisory capacity and from associating with any investment company.  OMNI also agreed to provide a copy of the settlement to all of its former clients between September 2008 and August 2011.

According to the SEC’s order, Feltl & Company failed to adopt and implement written compliance policies and procedures for growing advisory business. It neglected to adopt a code of ethics and collect the required securities disclosure reports from its staff.  Feltl also improperly charged undisclosed commissions on certain transactions in clients’ wrap fee accounts.  Under the settlement, Feltl agreed to pay $50,000, and return over $142,000 to certain advisory clients. Additionally, the firm will hire a consultant to review compliance operations for two years, provide a copy of the SEC’s order to past, present and future clients, and prominently post a summary of the order on its website.

According to the SEC’s order, SEC examiners found that Asset Advisors LLC had failed to adopt and implement a compliance program. After the SEC warned the firm of these deficiencies, the firm adopted policies and procedures that were not fully implemented, and failed to adequately abide by a code of ethics.

Investigations related to the Asset Management Unit’s compliance program initiative are continuing.

Click here to access this press release.


Categories

Enforcement Actions, Investment Advisers