Three investment firms have been sanctioned by the US Securities and Exchange Commission for violating a custody rule designed to ensure the safekeeping of customer funds, the regulator said.
Three investment firms have been sanctioned by the US
Securities and Exchange Commission for violating a custody rule designed to ensure the safekeeping of customer funds, the regulator said.
The SEC said New
York-headquartered Further Lane Asset Management,
GW & Wade of Wellesley, MA,
and Knelman Asset Management Group of Minneapolis
failed to maintain customer assets with qualified custodians, or hire
independent public accountants to conduct "surprise exams" to verify
the assets exist.
According to the commission, the charges were based on a
2010 amendment to a rule adopted under the Investment Advisers Act of 1940. The
rule requires advisors to have surprise exams and to have a reasonable basis to
believe that custodians are sending account statements to investors at least
once a quarter.
"The heart of the relationship between advisors and
their customers is the safety of client assets," said Andrew Ceresney,
co-director of the SEC enforcement division.
"Surprise exams or procedures associated with audited
financial statements provide additional safeguards against assets being stolen
Further Lane, chief executive Jose Miguel Araiz and an
affiliated advisor agreed to pay $347,122 to settle with the SEC, while
Araiz also agreed to pay a $150,000 penalty and accept a one-year industry ban.
GW & Wade and Knelman agreed to pay respective penalties
of $250,000 and $60,000 to settle, while chief executive Irving Knelman
accepted a $75,000 penalty and three-year ban from serving as a chief
compliance officer, the SEC added.
Neil Goldberg, a principal with GW & Wade, said in the
SEC statement that his firm had responded promptly to the regulator’s concerns
and has enhanced oversight.