SEC Charges Five Advisory Firms for Custody Rule Violations

The Securities and Exchange Commission today announced charges against five investment advisers for failing to comply with requirements related to the safekeeping of client assets. Three of the firms were also charged with failing to timely update SEC disclosures regarding audits of their private fund clients’ financial statements. All five advisory firms have agreed to settle the SEC’s charges and to pay more than $500,000 in combined penalties.

The advisory firms are:

  • Lloyd George Management (HK) Limited;
  • Bluestone Capital Management LLC;
  • The Eideard Group, LLC;
  • Disruptive Technology Advisers LLC; and
  • Apex Financial Advisors Inc.

According to the SEC’s orders, the five firms failed to do one or more of the following: have audits performed; deliver audited financials to investors in a timely manner; and/or ensure a qualified custodian maintained client assets. In addition, according to the SEC’s orders, two of the firms failed to promptly file amended Forms ADV to reflect they had received audited financial statements, and one of the firms did not properly describe the status of its financial statement audits for multiple years when filing its Form ADV.

“The Custody Rule and the associated Form ADV reporting obligations are core to investor protection,” said Andrew Dean, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “We will continue to ensure that private fund advisers meet their obligations to secure client assets.”

Without admitting or denying the findings, the firms agreed to be censured, to cease and desist from violating the respective charged provisions, and to pay civil penalties ranging from $50,000 to $225,000.

This is the second set of cases that the Commission has brought as part of a targeted sweep concerning violations of the Investment Advisers Act’s Custody Rule and Form ADV requirements by private fund advisers after charging nine advisory firms in September 2022.

Source: SEC

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