Compliance Program Rule, Rule 206(4)-7 | Form ADV

SEC Schools Advisory Firm on Compliance Obligations

The_School_Room_1835-300x217By Chelsea Bosiljevac, Compliance Associate

May 11, 2016

The SEC recently issued a settlement order against an SEC-registered investment adviser and its CEO/CCO, demonstrating a continued focus on the SEC’s call for dedicated Chief Compliance Officers with relevant training.  The SEC found that Marco Investment Management, LLC (“Adviser”) and its CEO/CCO failed to charge clients according to the terms of their investment advisory agreements, resulting in overbilling in some cases where assets in margin accounts were included.  As a result of the miscalculation, multiple violations of the Investment Advisers Act of 1940 were found, including misstatements of assets under management on Form ADV, violations of the books and records rule, and violations of the compliance program rule.  The Adviser was required to repay those clients it overcharged to the tune of $125,000, and pay a fine of $100,000.  The CEO/CCO was required to pay a fine of $50,000, and interestingly, attend 30 hours of compliance training.  The firm was also required to hire a new CCO and an independent compliance consultant, and conduct quarterly reviews of its compliance program.  Finally, the Adviser had to provide a copy of the SEC’s order to all of its current and prospective clients, and include a hyperlink to the SEC’s order on its website.