Penalty Against Investment Advisers for Compliance Failures

Jack Humphrey, Regulatory journalist
November 30, 2011 /

The Securities and Exchange Commission has charged three investment advisers for failing to adopt and implement written compliance policies and procedures designed to prevent securities law violations.

The SEC Enforcement Division’s Asset Management Unit works to prevent harm on investor by working closely with agency examiners to ensure that viable compliance programs are in place at firms.

The firms charged with compliance failures in separate cases include 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 the firm’s chief compliance officer despite living in Brazil and performing virtually no compliance responsibilities. Feltl & Company, Asset Advisors, and Beynon will pay financial penalties and institute a series of corrective measures to settle the SEC’s charges.

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

According to the SEC’s order in the case against OMNI and Beynon, between September 2008 and August 2011, OMNI had no compliance program and there was no proper supervision to its advisory representatives. Beynon assumed the chief compliance officer responsibilities 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. 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 Commission.

On the case against Feltl & Company, the SEC claimed that the firm engaged in hundreds of principal transactions with its advisory clients’ accounts without informing them. Feltl also improperly charged undisclosed commissions on certain transactions in clients’ wrap fee accounts, the SEC added.

On the other hand, the SEC found that Asset Advisors 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, 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.

The SEC’s investigation of OMNI and Beynon was conducted by John Mulhern and James Scoggins of the Denver Regional Office. The SEC examination was conducted by Julie Sperling of the Salt Lake Regional Office and Mark Snyder, Nicholas Madsen and Thomas Piccone of the Denver Regional Office.

The SEC’s investigations of Feltl & Company and Asset Advisors were conducted by Margaret Gembala Nelson and Paul Montoya of the Chicago Regional Office. The SEC examinations were conducted by Todd Bielskis, Frank Ronis, Sharon Larson, Diane Farley, Kiley Hamilton, Emad Elsebaie, Lou Gracia, Tom Kirk and Steve Levine of the Chicago Regional Office.

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

 

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